Marketing No Comments

We must be ready for further stimulus, says Bank of England’s Andrew Bailey

The Bank of England and other policymakers must be ready to take further action to help the UK’s economy because of the risk of the coronavirus shutdown causing long-term damage, governor Andrew Bailey has said.

“We are still very much in the midst of this,” Bailey told broadcasters today.

His comments come after new data showed the UK’s economic output tumbled over 20 per cent in April, suffering the largest drop since records began in 1997 as the coronavirus lockdown brought many sections of the economy virtually to a halt.

“We hope that will be as small as possible but we have to be ready and ready to take action, not just the Bank of England but more broadly, on what we can do to offset those longer term damaging effects,” Bailey said.

To find out more about how we can assist you with your Mortgage requirements, please click here to get in touch

While the fall in April – when the economy spent a full month under lockdown – was dramatic, the big question was how much long-term damage this would inflict on Britain’s economy, he said.

Before the Open newsletter: Start your day with the City View podcast and key market data

Bailey said the record drop in GDP was close to the central bank’s expectation for the month, and reiterated his view that some early signs of economic recovery have emerged since then.

The Band of England is expected to announce an expansion of at least £100bn in its bond-buying firepower when its Monetary Policy Committee meets next week in order to limit the damage caused to the economy by the Covid-19 pandemic.

The central bank has already spent the bulk of the record £200bn expansion to its asset-buying programme, which was launched in March.

While the BoE has reduced interest rates to an all-time low of 0.1 per cent in a bid to mitigate the economic impact of the virus, it has not been willing to follow other central banks in setting negative rates.

This decision means that the Bank’s main tool for combatting the coronavirus-induced recession is its bond-buying programme.

Speaking earlier this week, Bailey said the recession triggered by the pandemic will be “different” to others.

“If there is any such thing as a normal recession… this one will be different. There will be elements of a faster recovery, because the first stage of the recovery is literally lifting restrictions and allowing people to go out,” Bailey said at a panel hosted by the World Economic Forum.

By Anna Menin

Source: City AM

Marketing No Comments

Coronavirus: Housing market rebounds as sales increase by 137%

The property market has bounced back from a freeze over the coronavirus peak thanks to a build-up in demand and homeowners realising the shortcomings of their properties while cooped up during lockdown.

More homes were sold last week than this time last year and buyer demand is 54 per cent stronger than it was before the market was frozen on March 27.

Richard Donnell, director of research at Zoopla, the property portal, said that sales had risen by 137 per cent since the market reopened on May 13.

“The rebound in housing demand is not solely explained by a return of pent-up demand,” he said. “Coronavirus has brought a whole new group of would-be buyers into the housing market. Activity has grown across all pricing levels, but the higher the value of a home, the greater the increase in supply and sales as people look to trade up. New sales in London are lagging as buyers look at commuting and moving to the regions.”

To find out more about how we can assist you with your Mortgage requirements, please click here to get in touch

The data was backed by analysis from TwentyCi, a market statistics company, which reported that 24,341 homes were sold subject to contract last week, compared with 22,880 this time a year ago.

Asking prices are 6 per cent above the level this time last year, according to Zoopla. In the week the market was frozen the average asking price was £245,000; in the week it opened last month it was £280,000, according to TwentyCi. Anecdotal evidence suggests, however, that buyers are chipping prices down by 5 to 10 per cent.

Deals agreed have been particularly strong at the top end of the market. Those priced at more than £1 million have doubled in the past week to 664, compared with 494 a year ago. However, the largest number of sales last week — 8,956 properties sold subject to contract, compared with 7,744 this time last year — was for homes valued between £250,000 and £500,000.

Lucian Cook, director of research at Savills, estate agency, says: “That resurgence in sales at the top end tallies with our own numbers, Savills sales rose by 108 per cent last week and were particularly across the home counties where they went up by 148 per cent. This is a rebound far beyond what we expected.”

Mr Donnell sounded a note of caution, however. “The charts are off the scale but I do think this is a one-off surge in demand, a temporary jump,” he said. “No one truly knows what the economic impact of coronavirus is going to be. The housing market is purely an extension of the economy and I am very cautious about the second half of the year.”

One of Britain’s biggest housebuilders has said that sales will be “severely constrained” until the lockdown is lifted. Bellway has reported a 69 per cent drop in its weekly net reservation rate between March 23, when the lockdown started, and the end of last month.

The Centre for Economic and Business Research revised its house price forecast up from a fall of 13 per cent this year to one of 8.7 per cent.

Analysts have said the government’s furlough scheme and mortgage holidays are “softening the blow”. When they end it is feared that the market will be hit by unemployment and affordability concerns, leading homeowners to sell and driving prices down.

By Carol Lewis

Source: The Times

Marketing No Comments

Mortgage payment holidays extended for three more months

Those struggling to pay their mortgage due to coronavirus will be able to extend their mortgage payment holidays for three more months, or start making reduced payments, the financial regulator has confirmed.

The Financial Conduct Authority (FCA) published draft guidance last month with proposals for helping those with mortgages, including extending the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty would be able to ask for one up to this date.

The measures proposed have now been confirmed after a brief consultation and the guidance will come into force from this Thursday (4 June).

What the FCA expects mortgage lenders to do

Here’s a full rundown of the new rules being put in place by the FCA:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties. 

    Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will continue until 31 October 2020.
     
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is. MSE revealed last month that taking a mortgage or other payment holiday could still have an impact on future credit applications. 

The FCA adds that these rules are minimum standards and that they don’t stop firms from going above and beyond, for example by offering reduced interest.

Buy-to-let mortgages aren’t technically covered as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What does the FCA say?

Christopher Woolard, interim FCA chief executive, said: “The measures we have confirmed today will mean anyone who needs to can get help from their lender, if they are still struggling to pay their mortgage due to coronavirus.

“It is important that if a consumer can afford to restart mortgage payments, it is in their best interests to do so. Customers should talk to their firm about the best option available for them.”

By Callum Mason

Source: Money Saving Expert

Marketing No Comments

Homeowners set to be able to extend mortgage payment holidays

Those struggling to pay their mortgage due to coronavirus are set to be able to extend their payment holidays for three more months, or start making reduced payments, in proposals published today.

On 17 March, banks agreed with the Chancellor that they would offer ‘forbearance’ (tolerance and help) on mortgages, meaning they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time.

Over 1.8 million mortgage payment holidays were taken up, and the first of these will be ending in June. But an extension of another three months will now likely be available.

The Financial Conduct Authority’s (FCA’s) new draft guidance also includes an extension of the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty will be able to ask for one.

The current ban on repossessions of homes will be continued until 31 October as well.

Full info on what the FCA expects mortgage lenders to do?

At the moment, these proposals aren’t confirmed. The FCA says it welcomes comments on them until 5pm on Tuesday 26 May, and then expects to confirm them shortly afterwards. Here’s what it’s proposing:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties.
  • Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will be continued until 31 October 2020.
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is.

The FCA adds that these recommendations are minimum standards and that they don’t stop firms from going above and beyond, for example, by offering reduced interest.

Buy-to-let mortgages aren’t technically covered by today’s announcement as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What impact could a mortgage holiday have on my credit score?

As Martin and the FCA have pointed out, while mortgage payment holidays won’t be marked as missed payments on your credit report, they could still have an impact on your wider creditworthiness, as lenders can find out about them through bank statements or ‘Open Banking’ data, and can factor them in. As Martin says…

‘We wait to see how substantial the impact will be – but those who need a mortgage holiday should still do it’

The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.

It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year. Each lender’s assessment process is different; it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.

Certainly many new challenger financial firms talk about their new, more sophisticated customer assessment models, that they believe are better than just relying on credit files. It’s that very fact that sparked me to look at this in the first place. And as they will be able to see that someone has temporarily not paid their mortgage, they can spot payment holidays.

My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won’t be used by many firms, and where it is it won’t tarnish individuals’ credit reputation for too long. But there’s no real way to know.

Most importantly, I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.

What does the FCA say?

Christopher Woolard, FCA interim chief executive, said: “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”

By Callum Mason

Source: Money Saving Expert

Marketing No Comments

UK economy to recover slowly from COVID – budget office

Britain’s economy is unlikely to have a quick bounce back as it recovers from its coronavirus shutdown which could have wiped more than 30% off output last month, the head of the country’s budget forecasting office said on Sunday.

Robert Chote, chairman of the Office for Budget Responsibility (OBR), said April was probably the bottom of the crash as the government is now moving to gradually ease its lockdown restrictions.

“We know that the economy, probably at its worst last month, may have been a third or so smaller than it normally would have been, in terms of output of goods and services and people’s spending,” he told BBC television.

“But that should be the worst of it.”

Britain, like many other countries, has shut down much of its economy to slow the spread of COVID-19.

Last month, the OBR said Britain’s gross domestic product could plummet by 13% in 2020, its biggest collapse in more than 300 years.

Chote said a quick, V-shaped recovery included in that report was only meant to be an illustrative scenario to show the hit to the public finances.

“In practice I think you are likely not to see the economy bouncing back to where we would have expected it otherwise to be by the end of the year, on that assumption, but instead a rather slower recovery,” Chote said.

As well as the pace of the lifting of the lockdown, the speed of the recovery would depend on how cautious consumers remained and how companies adjust to changes in the economy such as more demand for online retailing and less for restaurants.

Chote said Britain would not necessarily have to return to severe public spending cuts to cope with the debt surge that will come from its response to the coronavirus crisis.

Key factors include how much permanent damage the economy suffers, the level of interest rates on public debt – which are currently rock-bottom – and how much the country wants to spend on health and other services.

“But a post financial crisis-style, extended period of austerity is not a done deal,” Chote said, adding tax increases were another option.

Prime Minister Boris Johnson has said he will not lead Britain into a new period of austerity after previous Conservative-led governments sought to fix the public finances by cutting spending in many areas of public services.

Writing by William Schomberg

Source: UK Reuters

Marketing No Comments

Coronavirus: UK economy shrinks two per cent in first quarter of 2020

The UK economy shrank by two per cent in the first three months of 2020 due to the impact of coronavirus, official GDP data showed today.

The slump showed the UK economy’s contracted at its fastest rate since the height of the financial crisis in 2008.

The lockdown, which started on 23 March, saw the UK economy shrink a record 5.8 per cent that month alone.

And April’s data is likely to be far worse for UK GDP growth. Almost all shops except supermarkets and pharmacies remain shut in the coronavirus lockdown. And millions of workers are furloughed, with chancellor Rishi Sunak extending the job retention scheme to October.

UK GDP shrank in all the economy’s key sectors over the quarter, the Office for National Statistics (ONS) data showed.

The services sector suffered a record 1.9 per cent decline, the production industry posted a 2.1 per cent slump and there was a 2.6 per cent drop in construction.

March suffers record hit to UK GDP

Those sectors suffered their biggest hits in March as the UK economy shrank a staggering 5.8 per cent. All sectors were badly hit, though services posted the worst drop, a decline of 6.2 per cent.

Jonathan Athow, deputy national statistician for economic statistics, said: “With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall.

“Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially.

“Although very few industries saw growth, there were some that did including IT support and the manufacture of pharmaceuticals, soaps and cleaning products.

“The pandemic also hit trade globally, with UK imports and exports falling over the last couple of months, including a notable drop in imports from China.”

CBI: Government stimulus crucial to UK economy recovery

The CBI’s chief economist, Rain Newton-Smith, warned the full impact of the coronavirus lockdown is still to come.

But she pointed to government measures such as the extended job retention scheme, and loans for small businesses, as being crucial to the UK economy’s eventual recovery.

“The range of financial support for businesses and workers provided by the government has been a lifeline for many firms so far,” she added. “These schemes are critical in keeping companies afloat and they will need to adapt as the economy restarts.

“Reopening our economy will be a gradual, complex process. The Ggovernment’s new guidance has helped, giving businesses some flexibility for their individual circumstances. Ultimately, keeping health at the heart of a recovery plan will be key to sustaining an economic revival.”

BCC: UK facing coronavirus recession

The British Chambers of Commerce said the second quarter will likely see UK GDP plunge by a worse margin. A consecutive quarter of decline would signal a full-blown recession.

The BCC’s head of economics, Suren Thiru, said: “The speed and scale at which coronavirus has hit the UK economy is unprecedented. [It] means that the Q1 decline is likely to be followed by a further, more historically significant, contraction in economic activity in Q2.

“While a swift ‘V-shaped’ economic revival as restrictions are lifted may prove too optimistic, government support can play a vital role in avoiding a prolonged downturn. The extension of the furlough scheme was a crucial first step, but more needs to be done to ensure that the right support is in place to deliver a successful restart of the economy.”

UK economy enters ‘freefall’

Capital Economics’ chief UK economist, Ruth Gregory, warned March’s record fall was only the tip of the iceberg.

“March’s GDP figures showed that the UK economy was already in freefall within two weeks of the lockdown going into effect,” she said. “And with the restrictions in place until mid-May and then only lifted very slightly, April will be far worse.

“The gradual lifting of containment measures suggest that April will probably prove to be the low point. Nevertheless, we think that it will be a long time before activity returns to pre-crisis levels.”

The dour outlook for the UK economy pushed the FTSE 100 lower today.

London’s blue-chip index fell almost one per cent this morning. However, the two per cent fall in GDP was better than a forecast drop of 2.6 per cent for the UK, Avatrade analyst Naeem Aslam said.

But he warned that “the worst is still about to come”.

“The question is how the Bank of England is going to look at this economic data,” Aslam said. “And if they will continue to rule out the negative rates and if they will expand their loose monetary policy further. But currency traders are more focused on forward-looking factors such as the Prime Minister’s three-stage plan to open the economy.”

By Joe Curtis

Source: City AM

Marketing No Comments

UK economy will not be back to work until July at very earliest – Raab says

The British government said non-essential retailers would not go back to work until June at the earliest while other sectors will not go back to work until July at the earliest, Foreign Secretary Dominic Raab said on Monday.

“There’s the other changes for things like non essential retail and people going back to school, particularly primary school, which won’t start until the earliest on the first of June, subject to conditions,” Raab said.

“Starting from the 4th of July at the very earliest, those other sectors where they are inherently more difficult because people are mixing together and it’s difficult to maintain the social distancing, we wouldn’t be able to say … that we would start them at least until the 4th of July.”

Reporting by Guy Faulconbridge and Kate Holton

Source: UK Reuters

Marketing No Comments

Equity release activity soared before the lockdown

There was £1.06bn of equity release activity in Q1 before lockdown took effect, data from the Equity Release Council shows.

This represents a rise of 14% from the £936m recorded over the same period last year.

It was driven by strong consumer confidence in early 2020 after the general election.

David Burrowes, chairman of the Equity Release Council, said: “These figures reflect the return of consumer confidence to the broader UK economy at the start of the year, after December’s election promised to restore certainty before coronavirus took hold.

“Pent-up demand from 2019 meant homeowners continued to look to property wealth in growing numbers for later life finance in January and February, backed by strong consumer protections and increasing product flexibility.”

There were 11,079 plans agreed in Q1, the largest total in the first quarter since records began in 1991.

Drawdown lifetime mortgages made up 57% of plans taken out, with lump sum mortgages accounting for 43%.

Claire Singleton, CEO of Legal & General Home Finance, said: “The current Covid-19 environment clearly presents challenges, and it’s currently too early to gauge the impact it will have on demand.

“However, we believe the fundamental drivers of growth remain, and we expect the upward trajectory to continue. Indeed, unlike many other areas of the housing market, equity release has not stalled and the industry has adapted well to the challenges of social distancing and remote working.

“However, it must be made clear that equity release is not an ‘immediate needs’ product and therefore requires careful consideration. Much has changed since the start of the year, making it even more important to pause, take advice and avoid reacting hastily to financial concerns.”

Jonathan Barrett, partnerships director at digital retirement solutions fintech, ABAKA said: “While the equity release market is now facing the challenges posed by coronavirus and the impact of lockdown, there is a clearly still pent up demand from consumers for lifetime mortgages and other later life lending products.

“Advisers and providers will all need to be ready to manage that demand from consumers when we come to the end of this crisis, but the advice gap the sector is facing could prove to be a bottleneck.”

He added: “Recent rule updates from the Equity Release Council which now allow for remote advice mean advisers will be having to adapt more quickly to the digital world.

“Tools like AI-powered chatbots can also help support this transition by answering questions from potential customers, so that advisers can focus on supporting their clients through the equity release journey.”

BY RYAN BEMBRIDGE

Source: Property Wire

Marketing No Comments

Philip Hammond calls for UK economy to reopen

The former Chancellor Philip Hammond has called the government to ease the lockdown measures and reopen the UK economy.

Hammond told the BBC’s Radio 4’s Today programme, “The reality is that we have to start reopening the economy.

“But we have to do it living with Covid.

“We can’t wait until a vaccine is developed, produced in sufficient quantity and rolled out across the population.

“The economy won’t survive that long.”

Peel Hunt has just released the results of its COVID-19 survey of investors, corporate managers and other UK finance professions (banking/legal/accounting), revealing the City’s views on what shape the recovery will take, how investor habits and priorities will change post lockdown, and the outlook for corporates in a post-COVID market.

Source: London Loves Business

Marketing No Comments

How badly will coronavirus hit UK house prices in 2020?

UK house prices could fall by as much as 10 per cent this year due to the impact of coronavirus, experts predict.

UK house prices had started to recover from uncertainty caused by Brexit at the end of 2019.

And the so-called Boris bounce from the Tories’ election victory in December set the market up for a strong start to 2020.

But then coronavirus came along, sending the UK into lockdown – meaning buyers couldn’t visit houses, a fairly crucial step when moving house.

The dramatic economic hit has also made people more wary of making big purchases right now.

While the impact of the coronavirus outbreak on UK house prices is not yet fully understood, analysts believe they will dip in the second and third quarters of 2020.

The latest Rightmove research published this week showed the average price of property coming to market this month dipped 0.2 per cent to £311,950. By contrast, in April last year UK house prices increased 2.1 per cent.

The property platform said there is not a “functioning [housing] market” due to the coronavirus lockdown and that new sales were “almost impossible”.

Meanwhile, figures published this week by the Land Registry and the Office for National Statistics showed inflation fell back to 1.1 per cent in February after climbing to an eight-month high of 1.5 per cent in January.

What will happen to house prices in 2020?

Analyst predictions on the impact of coronavirus on UK house prices vary due to the uncertainty surrounding the lockdown exit plan and the wider economic impact.

Zoopla: Impossible to predict scale of blow

“History tells us that house prices tend to fall when the economy shrinks as a result of falling output,” says Richard Donnell, research director at property platform Zoopla.

“[This] has a knock on impact for unemployment or higher borrowing costs – all things that can result in more ‘forced sellers’.”

“Thus the scale of the impact on house prices depends upon the scale of the economic impact from Covid-19.”

Savills: House price fall of up to 10 per cent

Estate agent Savills estimated that average UK house prices will fall between five per cent and 10 per cent in the short-term while the low transaction market caused by the coronavirus lockdown continues.

EY: House prices could fall five per cent

Howard Archer, chief economist at EY Item Club, forecast that UK house prices could drop between three per cent to five per cent in the second and third quarters of 2020.

Knight Frank: Prices to sink three per cent

Meanwhile, Knight Frank predicted that average UK house prices will dip three per cent this year, and property values in London will fall two per cent.

Chesterton’s: House price drop of two per cent

London estate agent Chesterton’s also estimated that house prices in the capital will fall two per cent in 2020 due to coronavirus.

When will UK house prices bounce back from coronavirus?

Despite the gloomy outlook for house prices this year, most analysts believe the housing market could make a strong recovery by 2021.

CBRE said that pent up demand in the period after the coronavirus crisis is likely to cause a “spike in activity” in the housing market.

Knight Frank: London house prices to jump six per cent in 2021

Knight Frank forecast that London house prices will jump six per cent in 2021, while Chestertons said it expected to see growth of three to four per cent in central London next year.

Savills: London house prices to lead recovery

Despite forecasting a steep decline in UK house prices this year, Savills was more optimistic about the years ahead. The estate agent’s analysts say mid-term price growth will be an average of 15 per cent over the next five years, with prime central London leading the recovery.

EY: House price recovery of two per cent in 2021

However, EY Item Club’s Archer was more cautious, saying UK house prices could grow by two per cent next year.

“Given the impact on the economy from coronavirus, the likely substantial rise in unemployment and the impact on many people’s incomes, the housing market looks unlikely to return to the levels seen at the start of 2020 for some time,” he said.

By Jessica Clark

Source: City AM