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Bank of England hints at rate hike under orderly Brexit

The Pound managed to eke out some gains against its major peers on Thursday, after the BoE hinted that it could raise interest rates in the UK, should Theresa May manage to force a Brexit deal through parliament.

Communications out of the BoE yesterday were fairly mixed. Sterling had initially fallen after Governor of the Bank of England Mark Carney talked up the downside risks to growth posed by Brexit. Policymakers slashed their GDP growth forecasts for this year to just 1.2% from the previous 1.7% estimate. Carney also stated during his press conference that under a worst case ‘no deal’ Brexit, there would be a sudden loss of confidence in the UK among foreign investors, which could send the UK into recession.

Losses for the UK currency were, however, quickly reversed after Carney opened the door to an interest rate hike later in the year. Carney said that the markets were right to keep the possibility of a hike on the table and that the UK economy would rebound under a softer Brexit.

We think that the upward move in the Pound is indicative of the general optimism that markets currently have regarding an eventual passing of the Brexit deal. Under our base case scenario of a delayed, albeit successful and somewhat orderly EU exit, we still think that the Bank of England will raise interest rates towards the end of this year. This would be unambiguously positive for the Pound.

Euro sell-off continues on weak German data

The Euro continued on its gradual path of depreciation yesterday, edging towards the 1.1325 level against the US Dollar this morning for the first time in two weeks.

The sell-off that we’ve witnessed in the EUR/USD rate this week can largely be attributed to the recent soft economic data out of the Euro-area. German industrial production numbers out on Thursday were particularly troublesome. Output in the industrial sector of Europe’s largest economy contracted again in December by 0.4% and by a sizable 3.9% year-on-year (Figure 1).

Retail sales in Italy, which entered into its first recession in five years in Q4 2018, also came in negative, while the European Commission once again downgraded its growth forecasts for the Euro-area’s economy. The EC now expects the bloc to expand by just 1.3% this year, down from 1.9% last year. This is considerably below the levels that are conducive of higher interest rates from the European Central Bank.

Figure 1: German Industrial Production (2012 – 2018)

BoE
Source: Thomson Reuters Datastream Date: 07/02/2019

Today looks set to be a relatively quiet one in terms of economic news, with no major releases scheduled out of the US at all today. We will instead tentatively turn our attention to major US news out next week, namely the delayed US inflation and retail sales numbers. If, as much of the market expects, data out of the world’s largest economy begins to turn south, we could see the EUR/USD rate retrace some of its losses in the coming sessions.

Source: Ebury

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UK Construction Sector Signals Soft Start to the Year for Economy

– The UK construction industry saw a soft start to 2019. 

– As Brexit uncertainty hit commercial building segment.

– Economy and BoE rate outlook hinged on Brexit outcome.

The UK construction sector saw a soft start to the New Year, according to IHS Markit PMI data released Monday, with both current activity and new order growth slowing during the January month in a manner that could bode ill for other sectors of the economy.

January’s IHS construction PMI came in at 50.6, down from 52.8 in December, when economists had anticipated a decline to only 52.6. That’s the lowest level for the index since March 2018 when a fortnight of snow and inclement weather brought the industry to a standstill.

All three subsectors of the industry saw current activity levels soften this January, with commercial construction firms seeing the most notable deceleration. Companies told IHS that uncertainty over Brexit and the impact an EU exit will have on the economy is the main thing holding them back.

Growth in the civil engineering sector continued in January although at a reduced pace from the 19-month high seen back in December, while the supply and demand disparity in the UK housing market meant residential construction firms saw only a modest deceleration last month.

“Uncertainty about Brexit has snuffed out the recovery in the construction sector. The total activity index dropped to its lowest level since the March 2018 snowstorms and now is below the 52 level which in practice has separated rising from falling construction output in the past. Builders have become more pessimistic about the outlook too,” says Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Above: IHS Markit activity index.

PMI surveys measure changes in industry activity by asking respondents to rate conditions for employment, production, new orders, prices, deliveries and inventories. A number above the 50.0 level indicates industry expansion while a number below is consistent with contraction.

Markets care about the data because it is an important indicator of momentum within the economy. And economic growth has direct bearing on consumer price pressures, which dictate where interest rates will go next.

Despite the downbeat tone of survey responses addressing conditions in January, most firms are still optimistic about the outlook for the year ahead. However, this could easily change during the months ahead if the UK leaves the EU without any formal agreement governing life after exit day.

Prime Minister Theresa May failed on the first attempt to pass her highly contentious Withdrawal Agreement through the House of Commons, although the bill will be put to another vote before MPs next week.

If it is not ratified before March 29, 2019 the legal position is the UK will leave the EU and default to trading with it on World Trade Organization (WTO) terms. Most economists now say that would weigh on UK economic growth in the short and long term.

“The outlook for the construction sector is quite binary, based on the Brexit path chosen by politicians. In the unlikely event of a no-deal Brexit, the sector likely will slide into another recession, amid weaker business confidence and tighter credit conditions. But provided a deal is signed off, the construction sector likely will enjoy strong growth soon,” Pantheon’s Tombs adds.

Above: Construction PMI alongside ONS construction output measure. Pantheon Macroeconomics.

UK manufacturers also saw conditions deteriorate at the beginning of the New Year amid heightened uncertainty over the outlook for international trade, given the U.S trade war with China and almost the trajectory of the Brexit process.

January’s survey of the all-important services sector will be released on Tuesday, which means analysts will then have an idea of just what kind of start to the year the UK’s three largest economic sectors saw. This will be important for the Bank of England (BoE)interest rate outlook and Pound Sterling.

Bank of England officials have said repeatedly in recent months that they see inflation pressures building in the economy and that further interest rate rises will be necessary over the coming quarters if the consumer price index is to sustainably return to the 2% target over the coming years.

However, the exact trajectory of inflation will depend on the performance of the economy over the coming quarters, which itself will be heavily influenced by the outcome of the Brexit process in parliament. The deal-or-no-deal question is most key to the outlook.

“This week’s BoE Inflation Report will see growth and inflation revised lower and the Bank playing up Brexit uncertainty as a policy constraint, but SONIA is still biased strongly toward higher rates this year,” says Adam Cole, chief currency strategist at RBC Capital Markets. “We expect PM May’s “new ideas” to amount to little and the EU to remain intransigent on the backstop.”

UK construction

About: Market expectations of BoE base rate. Source: Pantheon Macroeconomics.

The BoE has raised its interest rate twice since November 2017, taking the Bank Rate up to 0.75%, but BoE officials are still saying that further rate hikes will be necessary if inflation is to remain under control in the coming years.

Unemployment has reached its lowest level since 1975 in the UK during recent months, as the post-referendum economy continues to create new jobs, and the number of unfilled job vacancies is still at a record high according to the Office for National Statistics.

This is forcing employers to raise wages and salaries for workers, which the BoE says will lead to even higher inflation further down the line. And the consumer price index is already above the bank’s target of 2%.

Inflation came in at 2.1% for December, down from 2.3% previously but in line with the consensus among economists. However, core inflation rose from 1.8% to 1.9% during the same month.

Core inflation excludes volatile commodity items like fuel, food, alcohol and tobacco from the goods basket so is thought to provide a more accurate reflection of domestically generated price pressures.

The latest economic forecasts suggest the consumer price index will fall again in January but that it will average 2.1% in 2019 even after one more rate hike.

The BoE will announce its latest interest rate decision and economic forecasts at 12:00 on Thursday 07, February.

Source: Pound Sterling Live

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BoE’s Haldane sees higher rates if UK economy ‘ticks along’ – Daily Mail

The Bank of England is likely to continue to raise interest rates gradually if the economy keeps growing, but will be “flexible” if there is a downturn, the central bank’s chief economist said in an interview published late on Wednesday.

“If the economy continues to tick along, as we expect, then we might expect some further limited and gradual rises,” central bank rate-setter Andy Haldane told the Daily Mail newspaper, repeating familiar BoE language.

The BoE raised interest rates for only the second time since the 2008-09 financial crisis in August 2018, and almost all economists expect further increases to depend on Britain avoiding a disruptive exit from the European Union in March.

“On the assumption that some deal is done, that would reduce uncertainty and, we think, cause people to take their finger of the pause button and do a bit more investment spending,” Haldane was quoted as saying.

“If the economy begins to change direction, we will be flexible in the face of that,” he added.

BoE Governor Mark Carney has previously said that a disorderly Brexit could cause sterling to slide while damaging the productive capacity of the economy — potentially boosting inflation at the same time as slowing growth.

Foreign ownership of British companies had been important in improving management practices and economic productivity more generally, Haldane said.

The BoE will publish its next interest rate decision on Feb. 7.

Source: UK Reuters

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Bank must make right call on interest rates if no-deal Brexit, Mark Carney says

The Bank of England governor says ‘it’s not automatic which way policy would go’ if Britain crashes out of EU.

Interest rates will not automatically go up or down if Britain crashes out of the European Union without a deal, the governor of the Bank of England has said.

Speaking at a panel at the World Economic Forum in Davos, Mark Carney said: “It’s not automatic which way policy would go in the event of a hard Brexit.

“And we’re remembering that we’re not predicting that, but we’ve got to be prepared for that”.

MPs are set for another crunch vote on the Prime Minister’s so-called “Plan B” Brexit deal on January 29, exactly two months away from Britain’s scheduled departure from the EU.

Theresa May’s first deal was rejected by Parliament by a majority of 230.

He said if the UK goes “through a period of de-integration, de-globalisation and reduction in trade openness” it would be “akin to a supply shock to the economy” with both demand and supply declining and currency and tariff pressures on inflation.

In those circumstances, he said the Bank “has to make the right judgment about the right path of bringing inflation back to target while doing what it can to support. But it is not an automatic approach.

“Particularly at times when there are big changes, you have to have some constants and for a central bank there are two constants: have a financial system that functions, which we would have if that were to happen, and keep your focus on your democratically given mandate, which is to achieve the inflation target.”

Inflation last month fell to 2.1%, within touching distance of the Bank’s 2% target.

Mr Carney also said that British businesses cannot completely prepare for a no-deal Brexit due to a lack of infrastructure at UK ports.

“There are a series of logistical issues that need to be solved, and it’s quite transparent that in many cases they’re not.

“So, port infrastructure is not there, border infrastructure is not there to the extent that it would need to be from jumping from an absolutely seamless trading environment to one with frictions that aren’t just tariffs, but are rules of origin of products, safety standards and other inspections that would need to be done.

“There is a limited amount businesses can do to prepare if there are going to be substantial delays on the logistical side”.

He used the example of logistics and supply issues that could arise for UK carmakers from a no-deal Brexit.

“If you are a car plant that relies on 40 18-wheelers [trucks] coming through Dover a day, and they have to show up within minutes of each other in order to meet the just-in time-requirements of the plant, you can’t stack things up all over Wales in order to ensure that you can continue to run it for months. That’s just reality.”

At the panel, the audience was asked for a show of hands to indicate if they were in favour of a second Brexit referendum. Mr Carney abstained, but UBS boss Sergio Ermotti raised his hand.

Source: Shropshire Star

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UK inflation falls again, leaving BoE under no pressure on rates

UK inflation hit its lowest in nearly two years in December as fuel prices fell, leaving the Bank of England under no pressure to carry on raising interest rates as uncertainty over Brexit dominates the economic outlook.

Consumer prices rose at an annual rate of 2.1 percent in December, slowing from 2.3 percent in November, the Office for National Statistics said, as a Reuters poll of economists had predicted. The rise was the smallest since January 2017.

Although inflation remained just above the Bank’s 2 percent target, it was likely to fall below that level soon and there was little immediate urgency for the BoE to move, economists said.

The central bank has sketched out a range of Brexit scenarios including a worst-case no-deal outcome in which sterling would plunge to parity against the dollar, inflation would exceed 6 percent and the economy contract by 8 percent.

On Tuesday, MPs voted against Prime Minister Theresa May’s Brexit plans by a crushing margin. BoE Governor Mark Carney said on Wednesday that sterling’s rise after the vote suggested investors felt the risk of a no-deal Brexit had diminished, or that the departure process would be extended.

May faces a vote of no confidence in her government moved by the opposition Labour Party on Wednesday that she is expected to win.

“Although we think that Brexit uncertainty will keep the Monetary Policy Committee on hold for the time being, we doubt the Bank will miss out on the global tightening cycle altogether,” Ruth Gregory, senior UK economist at Capital Economics, said.

The central bank has raised interest rates twice since late 2017 and has said it plans to carry on increasing borrowing costs gradually.

Wednesday’s inflation figures could be a relief for British consumers who have been pressured by inflation since the Brexit referendum in June 2016 which triggered a slump in sterling of more than 10 percent against the dollar and euro.

Inflation peaked at a five-year high of 3.1 percent in November 2017. It has fallen since then and wages have grown at their fastest in a decade.

But businesses have reported a downturn in consumer spending in recent months, and surveys show households are worried about the outlook for 2019.

Sterling and UK government bonds were little moved by Wednesday’s data which suggested less short-term pressure in the pipeline for consumer prices, with factory input costs rising at the weakest rate since June 2016.

The ONS also said house prices in November rose by an annual 2.8 percent nationwide compared with 2.7 percent in October. Prices in London alone fell 0.7 percent, the fifth month of decline — a run last seen during the financial crisis.

Source: UK Reuters

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No deal Brexit could see interest rates cut

The rejection by Parliament of the government’s Brexit deal could see interest rates cut, according to Richard Buxton, who runs the £1.7bn Merian Global Investors UK Alpha fund.

Last night (January 15) the Prime Minister faced a landslide defeat as her Brexit deal with the EU was rejected by MPs with 432 votes to 202.

Mr Buxton said: “If a deal can ultimately be agreed, I believe we may see the Bank of England hike policy interest rates up to three times over the course of 2019.

“Conversely, if the UK does leave the EU without an agreement, I would expect the Bank’s Monetary Policy Committee to move rapidly to cut interest rates from their already-low levels. The resumption of monetary stimulus, in the form of quantitative easing would, in my view, be a possibility.”

Central banks typically cut interest rates when they expect economic growth to slow.

David Zahn, head of European Fixed Income at Franklin Templeton, said markets crave certainty above all else, and so may welcome a no deal Brexit outcome as preferable to further delays.

He said: “The impact of such an outcome would be significant, but we don’t think a Hard Brexit would necessarily be the end of the world. In many ways, it could offer the quickest route to the certainty that markets crave.

“A no-deal Brexit would likely mean heightened levels of uncertainty for three to six months as things get worked out. In many areas, the EU has said it will extend the status quo ante for the next year while the two sides adjust to the new environment.

“The initial response would likely be negative: we’d expect bond markets to rally significantly; gilts would probably revisit their historic lows. But our perception is that if a Hard Brexit were confirmed, things could only get better.”

Saker Nusseibeh, chief executive at Hermes Investment Management, said: “We are watching closely to understand the secondary effects on stocks and currencies, inclusive of sterling, and the specific industries that are tied to frictionless trade.

“Most people would prefer to see an end to uncertainty. However, the sad truth is that continued uncertainty has prevailed, and there appears to be no clear plan B.”

Sterling rose by 0.05 per cent to $1.287 in the aftermath of the vote, after declining by more than 1 per cent earlier in the day.

The FTSE 100 has been 0.17 per cent lower since it opened this morning (16 January) but the shares of some companies exposed to the UK domestic economy, such as the retailer Next and Lloyds Banking Group, were up more than one per cent on yesterday’s closing price.

Source: FT Adviser

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Mortgage market going strong despite Brexit

Despite Brexit uncertainty dominating the headlines in 2018, the mortgage market has proved resilient, with lenders offering an ever-growing choice of products at competitive rates.

Property prices have slowed in many parts of the UK over the past year, notably in London and the South East, creating opportunities for buyers who might otherwise previously have been priced out of these areas. In contrast, places such as Yorkshire and Humberside, and the East Midlands, have seen prices accelerate.

Looking ahead in 2019, it is anyone’s guess what the full impact of Brexit will be both on property prices and the mortgage market.

Purchases

A limited supply of available properties has helped support property prices over the past year, and this is expected to continue in 2019.

Brexit is prompting many buyers and sellers to adopt a ‘wait and see’ approach until we leave the EU. This means that the number of properties being sold is likely to fall over the next three months, according to the Royal Institution of Chartered Surveyors.

Purchase activity may therefore be muted as we head into the New Year, despite the latest figures from UK Finance showing a more upbeat picture, with homemover mortgage numbers completed in October up 4 per cent compared to the same month last year.

Those struggling with affordability will still be able to make use of Help-to-Buy, which will continue to provide a boost for the new build market. The government’s confirmation that the scheme will continue to 2023, albeit within different parameters, will at least give clarity to developers and their forward planning.

Buy-to-let

Buy-to-let purchase activity has been hit by a raft of changes over the past few years, including the 3 per cent stamp duty surcharge on second properties, and the gradual reduction of mortgage interest relief.

This has meant that existing landlords have been more focused on managing their costs and protecting against future rate rises. Remortgage activity has been high as a result and fixed rates have been the product of choice.

Many landlords are opting for longer-term fixes, with five-year deals proving especially popular. Lenders are becoming increasingly flexible too, with some reducing stress rates on long-term fixes.

However, advisers will need to maintain a focus on the product being right for the customer, and not just choosing it based on lending criteria.

The increased use of limited company structures appears likely to continue, as landlords consider whether the structure can help them counter changes to tax relief. However, brokers will need to ensure that the right tax advice is sought by clients.

First-time buyers

The past year has seen strong first-time buyer numbers, with schemes such as Help-to-Buy providing much needed support to those wanting to get on the first rung of the property ladder.

Buyers may also have been helped to a degree by a reduction in competition from landlords. There have been other positives too, including improved product options and first-time buyer stamp duty relief.

Lenders are increasingly willing to offer mortgages to those with only a 5 per cent deposit to put down, and there is also a wide choice of innovative deals available to those who are reliant on financial support from the ‘bank of mum and dad’.

Where next for interest rates?

Given current political and economic uncertainty, it is extremely difficult to predict when, or even in which direction, we will see interest rates move next.

The Bank of England has consistently suggested that rate rises are likely to continue, albeit at a gradual pace. However, if there is a disorderly Brexit, inflation could rise on the back of any further weakening in sterling.

Higher inflation could lead to the BoE increasing interest rates, but there is also potential for the BoE to decide that the economy needs additional support, which could actually result in a cut in the base rate.

Either way, borrowers are likely to continue to lock into fixed rate mortgages to protect themselves against any potential shocks, and to give peace of mind that they know where they stand at a time when everything else is so hard to predict.

Source: FT Adviser

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Leave voters think falling house prices and higher interest rates are a price worth paying for Brexit

Falling house prices and higher interest rates are a price worth paying for Brexit, according to many Leave voters.

Research by YouGov found that various ‘worst-case scenarios’ predicted by the Bank of England were seen as being worth it in the minds of Leave voters.

According to The Times, 56% of Leave voters said interest rates rising to 4% would be a price worth paying for Brexit, compared to just 16% who don’t.

Brexiteers were also more likely to see falling house prices as a price worth paying, at 52% versus 20%, according to the report.

But they were split on the warning that unemployment could rise, with 35% seeing it as a price worth paying and 35% thinking it’s not a price worth paying.

The same went for the value of the pound falling (34% on both sides) and inflation rising (36% thinking it would be a price worth paying and 32% saying not).

YouGov quizzed people on individual worst-case scenarios set out by the Bank of England.

But its research also suggested that Leave voters are less likely to be worried about the scenario than Remainers.

According to The Times, while overall 77% of Brits think the Bank of England’s project rise in unemployment to 7.5% would be a bad thing – this works out at 69% or Leave voters, compared to 91% of Remainers.

And while just 1% of overall Britons see a GDP drop to be a good thing, it works out at 16% of Leave voters compared to 4% of Remain voters.

Source: Yahoo News UK

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Here’s how home buyers could save some money amid rising interest rates

With mortgage rates poised to rise, it might be time to dust off a strategy that could help prospective homeowners afford their new abode.

TransUnion, one of three major credit bureaus, predicted that the average interest rate on a 30-year mortgage would approach 5 percent by the end of 2019.

This rate is a far cry from the heyday of double-digit interest rates in the 1980s, but it’s a noticeable change from where rates were in the last year.

“For a lot of people who have only been around to know the mortgage environment where everything was 4 percent, 5 percent seems pretty dire,” said Monica Sonnier, CPA and member of the American Institute of CPA’s National CPA Financial Literacy Commission.

See below for average historical rates on 30-year mortgages.

Add to that the fact that sales prices on homes have continued to rise — the median listing price for a home is $276,000, as of Nov. 30, according to Zillow.

More individuals believe now isn’t a good time to buy a home, primarily because home prices are so high, according to December data from Fannie Mae.

Enter a strategy that could help potential buyers afford a new home, even as mortgages become more expensive: Paying your lender a fee upfront in order to reduce the interest rate on the mortgage.

This is known as paying “mortgage points” or “discount points.”

“Largely the option for points is often there, but it becomes more a question of whether consumers want to be proactive and ask about them or not,” Joe Mellman, senior vice president and mortgage business leader at TransUnion.

Here’s what you should know about points and whether this move might be right for you.

What’s the point?
Each point that you pay is equal to 1 percent of the amount that you’re borrowing. In that manner, one point on a $100,000 mortgage is equal to $1,000 — the amount of money you’ll need to give to your lender when you close on your loan.

Points don’t have to be round numbers; they can be fractional.

The example below from the Consumer Finance Protection Bureau compares a $180,000 mortgage with a 5 percent interest rate and no points to a loan for the same amount with 0.375 of a point and 4.875 percent interest.

In the end, an additional $675 in closing costs will lead to an overall monthly savings of $14, according to the CFPB.

To determine how long it will take to recoup the additional upfront cost of the points — your break-even point — you’ll need to divide the additional amount you paid by the amount of monthly savings.

In that sense, if you spend $2,000 on a point and save $30 a month due to lower interest, it will take you about 66 months or 5½ years to break even.

Deductibility
While points may be deductible on your income tax return, you will need to itemize in order to take the break.

Don’t let the tax deductibility of points drive your decision.

Now that the standard deduction has been raised to $12,200 for single filers and $24,400 for married couples who file jointly (for the 2019 tax year), fewer people are expected to itemize deductions on their returns.

Cash up front
Generally, home buyers need to make a down payment of at least 20 percent of the purchase price in order to avoid the additional monthly cost of private mortgage insurance.

But what if you have enough cash that you’ll need to choose between making a 20 percent down payment or using some of the money to buy points?

“If I put the money into the down payment, I reduce the balance I’m borrowing,” Sonnier said. “If I pay for points, I’ll have a higher balance, but at a lower rate of interest.”

Get out that calculator and compare your monthly savings over the life of the loan. That’s because the additional cost of the private mortgage insurance could cancel out the monthly savings from the points.

Ultimately, whether paying down points makes sense for you will depend on how long you’re staying in the house.

“The rule of thumb is that it takes about five to seven years to break even,” Sonnier said. “If you’re sure you won’t be in that house for five years, then it doesn’t make sense to pay down the points.”

Source: Yahoo Finance UK

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What can the mortgage market expect in 2019?

The mortgage market saw a fair amount of product innovation last year and that it likely to continue into 2019. In particular, equity release and the later life lending market is set to grow further as the older population increases. ONS figures show that in 2017, around 18.2% of the UK population were aged 65 years or over, up from 15.9% in 2007; and it is projected to grow to 20.7% by 2027.

Bank of England base rate went up twice last year to end 2018 at 0.75% – the first rises in a decade – but will the rate go up again in 2019? It is unlikely there will be any movement until we know what is happening with Brexit and even then any increases will be small and steady.

House sales have fallen in the past two years and RICS believes sales volumes will weaken by around 5% in 2019. It also thinks house price growth will continue to fade in the first half of the year and come to a standstill by mid-2019 taking the annual figures to a static 0%. Others agree that house price growth will stagnate with national estate agent Jackson-Stops predicting an average increase of 1% this year and Strutt & Parker forecast 2.5% growth.

NAEA Propertymark reports that the number of house hunters registering with estate agents is down as is the supply of housing for sale. It says almost two thirds (62%) of estate agents think the trend of renovating rather than moving will continue this year.

We have seen new lenders come into the market and more are set to enter in 2019 and they have the advantage of starting their journey with new systems. Technological development is going to be even bigger this year and we will see its impact throughout the whole housing chain. From viewing houses in the comfort of your own home to the rise in digital brokers, improvements in mortgage applications, enhancements in the surveying process and conveyancing journey.

Fintechs will work even more closely with established banks, building societies and specialist lenders. And the impact of open banking, which is still in its infancy and is a year old this month, will accelerate as more people get to understand it.

It will be a turbulent year for the UK as it withdraws from the European Union. Competition among mortgage lenders will continue as interest rates remain low and mortgage lending is likely to tick along at similar or slightly higher levels to 2018.

Source: Mortgage Finance Gazette