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House prices set to continue rising as supply shrinks

Residential house prices will increase by 9% this year as the market is driven by the extended stamp duty holiday and the impact of repeated lockdowns, Savills has predicted.

The estate agent has upgraded its expectations from the 4% annual price growth it predicted in March, prior to the chancellor’s stamp duty holiday extension.

Savills still expect property values to rise by 21.5% over the next five years, in line with previous forecasts, as price inflation eases following the removal of incentives.

Price growth continues to be fuelled by historic low mortgage rates, along with greater demand from buyers for properties with more space and greenery following months of lockdowns.

However, the company says that the shape of growth over the next four years is more difficult to forecast precisely given the extraordinary conditions of the past 18 months.

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“Some of the growth generated by the extraordinary market conditions of 2020 and 2021 could unwind at times during 2022, but we see nothing on the horizon that would trigger a major house price correction,” said Lucian Cook, Savills head of residential research.

Savills mainstream house price forecasts and economic assumptions:

202120222023202420255yr Total
UK9.0%3.5%3.0%2.5%2.0%21.5%
London7.0%2.0%1.5%1.0%0.5%12.4%
Base rate0.1%0.1%0.1%0.3%0.5%
Unemployment (UK)6.0%4.6%4.0%3.7%3.6%
Annual Income Growth (UK)0.8%0.0%4.1%3.9%3.8%17.2%
Source: Savills, Oxford Economics

Cook continued “New buyer demand continues to outweigh supply despite the potential stamp duty saving falling from £15,000 at June 30 to just £2,500 until the end of September, and this against low levels of supply.

“This imbalance looks set to continue,  underpinning further price growth over the near term, particularly as people look to lock into current low interest rates.  But such strong growth in 2021 will leave less capacity for growth over the next few years, particularly as interest rates are expected to rise a little earlier than leading commentators had previously projected.

“The rate at which interest rates rise will also shape price growth. A steeper than anticipated jump in rates would restrict growth, although it would have to be severe to lead to actual falls in values – an outside risk in our view.”

Interest rate rises are critical to the forecasts, Savills says. The forecasts assume a Bank of England base rate no higher than 0.5% by the end of 2025.

A number of other key factors point to what Cook describes as a ‘soft landing’ for the market, rather than any dramatic correction in property values. 

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Since the market reopened last year, price growth has been driven in large part by more affluent buyers, less reliant on mortgage debt and able to lock into low fixed interest rates. More generally, the pace of economic recovery has helped reduce unemployment levels, stress testing of lending is now embedded in the system, while interest rate rises are still expected to be slow and modest by the end of 2025, meaning a gradual squeeze on affordability.

These factors underpin Savills five-year forecasts, but they also indicate limited capacity for further price growth at the end of this period, without substantially affecting who is able to buy and the number of potential transactions. 

First-time buyers are likely to be increasingly reliant on government schemes and, where available, on the generosity of the bank of mum and dad, according to Savills. 

After a strong start to the year, and over 200,000 transactions in June alone, transaction volumes are projected to total 1.62m this, more than a third – 35% – higher than the yearly average over the five years pre-pandemic.

Savills continues to expect the markets of the Midlands and the North of England to show the strongest house price growth, due to greater capacity for growth before hitting affordability ceilings.  In the short term, however, buyer attention is expected to turn back towards urban markets, including London, as social distancing restrictions and international travel restrictions ease.

This will see the ratio of regional to UK average values slowly converge over the next five years, as the lower value regions see stronger growth, “catching up” with the rest of the country.

 202120222023202420255 years to 2025Av value* Dec 2020Forecast value end 2025
UK9.00%3.50%3.00%2.50%2.00%21.50%£230,920£280,568
North West10.50%4.50%4.00%3.50%3.00%28.00%£176,925£226,464
Yorkshire & The Humber10.50%4.50%4.00%3.50%3.00%28.00%£172,326£220,577
Wales10.00%4.00%4.00%3.50%3.00%26.80%£169,846£215,365
Scotland9.50%4.00%3.50%3.00%2.50%24.40%£156,768£195,019
North East8.00%4.00%3.50%3.50%3.00%23.90%£137,531£170,401
East Midlands9.00%4.00%3.50%3.00%2.50%23.90%£200,951£248,978
West Midlands9.00%4.00%3.50%3.00%2.50%23.90%£207,603£257,220
South West8.50%3.50%3.00%2.50%2.00%20.90%£264,512£319,795
South East9.00%3.00%2.50%2.00%1.50%19.10%£336,984£401,348
East of England8.00%3.00%2.50%2.00%1.50%18.00%£310,240£366,083
London*7.00%2.00%1.50%1.00%0.50%12.40%£486,562£546,896
Source: Savills (*Nationwide)

By MARC DA SILVA

Source: Property Industry Eye

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Buyer ‘frenzy’ pushes UK house prices to fresh high

House prices have hit another fresh high, industry data showed on Monday, despite the stamp duty holiday coming to an end, as surging demand outstripped supply.

According the latest Rightmove House Price Index, the average asking price was £338,447 in July, a 0.7% improvement on June and 5.7% hike on July 2020.

Rightmove said the first half of the year had seen a “buyer frenzy” and was the busiest on record, with house prices rising 6.7% in just six months.

The UK housing market has boomed in the last year, fuelled by both pent-up demand and the stamp duty threshold being raised to £500,000. Introduced by the chancellor last year, the tax break was due to end in March 2021 but is now being tapered out, reducing to £250,000 last month June before reverting to £125,000 in September.

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Homeowners have also re-evaluated housing needs during the pandemic, which has led to an imbalance in supply and demand. Rightmove said that 140,000 more sales were agreed upon in the first half, although there were 85,000 fewer new listings than the long-term average.

“This surge in activity has revealed a shortfall of 225,000 homes for sale which, if available, would have corrected this stark imbalance between supply and demand and would have stablished price growth,” Rightmove argued.

Tim Bannister, director of property data at Rightmove, said: “We predict that the number of completed sales will be the highest ever seen in a single month when June’s data is released by HMRC later this week.

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“The pandemic’s side-effect of a new focus on what one’s home needs to provide…is one of the driving forces behind four consecutive months of new record average property prices. Demand has also been boosted by the ongoing creation of new households and property being seen as an asset to hold, with historically low returns from many other forms of investment.”

Bannister added that the June deadline for stamp duty had further helped exhaust the stock of property for sale. “This has left prospective purchasers with the lowest choice of homes for sale that we’ve ever recorded, continuing price rises and stretched affordability.”

By Abigail Townsend

Source: ShareCast

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UK House Prices to Stabilise in H2 2021?

The average price of a home in the UK rose 10 per cent between May 2020 and May 2021, according to the latest data from the Office for National Statistics (ONS).

The figures, released yesterday, showed a slightly increase from the period between April 2020 and April 2021, when house prices went up 9.6 per cent. According to the ONS, the average home in the UK increased 0.9 per cent in May 2021 to reach £255,000. This is £1,000 below the high of March 2021.

Strangely enough, the region with the lowest annual growth was London, where house prices rose just 5.2 per cent between May 2020 and May 2021.

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There was no shortage of industry comment, much of it agreeing that the escalation in prices is due to slow over the second half of 2021.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “In May, double-digit house price rises hit the dizzying heights we last saw just before the onset of the financial crisis, but this could be as good as it gets for a while. We’re not expecting precipitous falls, but rises are unlikely to be as steep in the coming months. While homeowners may miss the boost to their wealth, it could be a blessed relief for buyers.”

Coles said that the figures for May reflected the ending of the Stamp Duty holiday. “Sentiment takes a while to feed into these figures,” she said, “because the gap between the initial enthusiasm of a house buyer and final exchange is a soul-destroying period of around three months. It means many of the property sales completing by the end of May are likely to have been agreed at the start of March – when Rishi Sunak confirmed the stamp duty extension in the Budget.”

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Others were more critical. Karen Noye, mortgage expert at Quilter, said that house prices were ‘completely detached’ from current circumstances.

She added that the economy is coming to a crossroads. “Many businesses will be buoyed,” she said, “by the prospect of the biggest opening since March 2020 on the horizon but simultaneously worried about having to cope with the furlough scheme being rescinded. With the stamp duty taper about to fully go in a matter of weeks the run of house price increases may be soon about to falter.”

BY PETE CARVILL

Source: Property Wire

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UK House Price Growth Goes to 13.4% – Nationwide House Price Index

Average house price growth in the UK has risen to 13.4 per cent, according to the latest Nationwide House Price Index, released yesterday.

The figures, released yesterday, show that prices grew 0.7 per cent month on month, after the taking into account of seasonal factors.

Commenting, Robert Gardner, chief economist for Nationwide, said: “Annual house price growth accelerated to 13.4 per cent in June, the highest outturn since November 2004. While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum. Indeed, June saw the third consecutive month-on-month rise (0.7 per cent), after taking account of seasonal effects. Prices in June were almost 5 per cent higher than in March.”

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There was much comment on the increase from within the industry. Sundeep Patel, director of sales at Together, said: “Another month of strong growth for house prices goes to show just how competitive the race for space has become, with buyers still eager to snap up properties at pandemic prices, ahead of the first taper for the Stamp Duty holiday extension ending this week. Today’s figures show house prices were up by 0.7 per cent month-on-month and annual house prices rose by a staggering 13.4 per cent – the highest level recorded since November 2004.”

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He added: “That said, from the second half of the year onwards, we are expecting to see things start to slow down as potential buyers adapt to this next phase of the pandemic, without Government support and tax breaks. Whatever property financing is needed in the future, lenders who can offer a degree of flexibility are going to be highly sought after, as people look to pursue property plans against their changing needs in the market.”

Others were far more critical.

Guy Harrington: “This is only going to end one way. Given the economic backdrop and with government support schemes ending in a few months, this insane level of growth is long overdue a correction. In some rural hotspots houses are selling for 40 per cent over the asking price. The UK housing market has a rocket attached that is burning low on fuel and once this perfect storm passes, we are headed for a serious shock to the system.”

BY PETE CARVILL

Source: Property Wire

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Pandemic boom drives UK house prices up by most since 2004

UK house prices jumped by the most in more than 16 years this month, soaring by 13.4% from June 2020, and demand is expected to stay strong while a coronavirus emergency tax break remains in place, mortgage lender Nationwide said.

In monthly terms, house prices were 0.7% higher than in May as buyers rushed to take advantage of the tax incentive and sought bigger homes after their experiences of lockdown.

“While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum,” Nationwide’s chief economist Robert Gardner said on Tuesday.

Economists polled by Reuters had expected prices to rise by 13.7% in annual terms and by 0.7% from May.

The tax break, introduced last year as part of British finance minister Rishi Sunak’s emergency support for the economy, had originally been due to expire at the end of March.

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But the first 500,000 pounds ($693,250) of any property purchase in England or Northern Ireland are now due to remain exempt until the end of June, and a 250,000 pound tax-free allowance will run until the end of September.

“Underlying demand is likely to remain solid in the near term as the economy unlocks,” Gardner said.

“Consumer confidence has rebounded while borrowing costs remain low. This, combined with a lack of supply on the market, suggests further upward pressure on prices. But as we look toward the end of the year, the outlook is harder to foresee.”

THE BOE IS WATCHING

As well as the tax break, Sunak’s huge jobs support programme is also due to be phased out by the end of September, raising fears of an increase in unemployment.

Nationwide said it was still possible that the shift in demand for larger properties seen during the pandemic would continue to help the market once the tax break is gone.

The lender published a survey last month showing that almost seven in 10 homeowners who were considering a move would be doing it even without the extension of the tax incentive.

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Nationwide said house prices were close to a record high relative to incomes, making it harder for first-time buyers to raise a deposit. But mortgage payments were not high as a proportion of pay, due mostly to low mortgage rates.

The Bank of England has said is monitoring the housing market as it weighs up the chances of a broader pick-up in inflation as the economy reopens. read more

Last week, the central bank left its key interest rate at an all-time low or 0.1% and made no change to its plan to increase its government bond purchases to 895 billion pounds.

Despite the signs of recovery in Britain’s economy, most BoE rate-setters said they wanted to “lean strongly against downside risks to the outlook”.

Nationwide said house prices in London rose at the slowest rate of any region in England during the second quarter of 2021 but they still increased by 7.3%. Northern Ireland was the strongest performing region, with prices up 14% year-on-year.

Writing by William Schomberg

Source: UK Reuters

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Average house price in Scotland has increased by 92 per cent

The average house price in Scotland has increased by 92 per cent since the start of house price data from Registers of Scotland (RoS) in 2003-04.

The latest statistics from Registers of Scotland’s Property Market Report 2020-21 show that the average price of a residential property in Scotland in 2020-21 was £194,100, up by 6.7 per cent on 2019-20 and up by 25 per cent when compared with the pre-financial crash average price of £154,813 in 2007-08.

The volume of residential property sales decreased by 6.5 per cent from 102,053 sales 2019-20 to 95,428 sales in 2020-21 and, although volumes were 36 per cent higher than the low of 70,334 sales in 2011-12, the 2020-21 figure was the lowest volume when compared with the previous three financial years (2017-18, 2018-19 and 2019-20).

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The introduction of Covid-19 measures resulted in a substantial drop in sales being submitted to Registers of Scotland for registration in the first quarter of 2020-21, followed by some higher-than-average increases in the latter quarters of the year as lockdown measures were relaxed.

The sales volume remains 36 per cent below the pre-financial crisis level peak of 149,944 sales in 2006-07.

The value of residential property sales in the financial year 2020-21 was £18.5 billion, a decrease of 0.2 per cent when compared with 2019-20.

This marked the first year there was a decrease when compared with the previous year since 2011-12. The residential sales market value increased every year from 2012-13 to 2019-20, but remains 19 per cent below the pre-financial crisis level peak in 2007-08 (£22.9bn).

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The report also looks at the non-residential market. The total market value of non-residential sales in 2020-21 was £2.8bn. Commercial sales accounted for 71 per cent of this total, with the remainder from sales of forestry, agriculture and land.

The non-residential market was also impacted by Covid-19 measures. In particular, there was an adverse impact on the market value of the commercial sales market, with market values in 2020-21 being lower in every month than the market values in 2019-20, except for March 2020-21.

Accountable officer Janet Egdell said: “The combined market value of the residential and non-residential markets in 2020-21 was £21.3bn (Residential £18.5bn and non-residential £2.8bn), 4.9 per cent lower than the previous year 2019-20. The combined market value remains 30 per cent lower than the peak of the market in 2007-08 (£30.4bn), but 24 per cent higher than 2003-04 (17.2bn).”

Source: Scottish Legal

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UK house prices rose at their fastest rate since 2004

UK house prices rose at their fastest rate since 2004 in June as buyers competed fiercely in a market rebounding from Covid-19 lockdowns, Nationwide said.

The average price of a property in the UK rose 13.4% in June from a year earlier to a record £242,709, Britain’s biggest building society said. In the quarter to the end of June prices rose 10.3%, up from 6.3% in the first quarter of 2021.

June’s rate of growth was boosted by the shutdown of the property market a year earlier during the first Covid-19 lockdown but prices also rose sharply because of a buying frenzy.

Households are rethinking their property needs in light of the crisis, heading for the suburbs and coastal towns for more space and cheaper prices. The market has also been charged up by Chancellor Rishi Sunak’s stamp duty holiday, whose full effect ends on 30 June with some benefits lasting until October.

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David Westgate, chief executive of property consultants Andrews Property, said: “It’s starting to feel like prices are freewheeling with buyers snapping up properties, particularly those with generous outside space, as soon as they come on to the market. The end of the full stamp duty holiday tomorrow may see activity cool a little but not significantly, as there are plenty of buyers who still have time and the motivation to complete before the tapered relief ends on 30 September.”

Prices rose in all parts of the UK, led by Northern Ireland where houses sold for 14% more than a year earlier. Wales was the next strongest region. In Scotland, where the stamp duty holiday ended in March, prices rose at an annual rate of 7.1% – the weakest in the UK.

In 2004, when prices were rising at a similar rate, the housing market was recovering from the Iraq war and heading for the financial crisis that caused Northern Rock to implode.

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Nationwide’s chief economist, Robert Gardner, said demand was likely to remain solid for a while with prices likely to rise further as the economy rebounds amid rising consumer confidence and low interest rates. But he said the outlook was hard to predict with the government set to reduce support for households and businesses but with many people still looking for more space.

“Underlying demand is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down,” Gardner said. “But even this is far from assured. Even if the labour market does weaken, there is also scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”

By Sean Farrell

Source: ShareCast News

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Average UK House Price Grows >£2,500 in a Month – Rightmove

The latest House Price Index from Rightmove indicates that the cost of a property coming to the market in the last month rose by £2,509.

Given that the average UK salary per month is a little under £2,000 after tax, this means that in many cases, the average home is earning more per month than the people inside it.

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Commenting on the figures, Marc von Grundherr, director of Benham and Reeves, said: “A 0.8% rise in monthly price rises, whilst slower in pace than in recent months, is still almost 10% annually if such a trend were to continue. That’s colossal growth and even more so at the top end of the market where homes are seeing over 12% rises in value despite the fact they may soon miss out on the maximum stamp duty holiday saving of £15,000. This bodes well and may confound the doomsayers that have been forecasting a cliff edge come the end of June.”

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Others were more critical. Matthew Cooper, managing director of Yes Homebuyers, said: “Property stock is evaporating at an alarming rate due to huge levels of buyer demand and this severe imbalance is causing an artificial property price boom. Great for sellers who can justify overpricing their home but not so great for the wider market that is already groaning under the pressure.”

BY PETE CARVILL

Source: Property Wire

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Property prices hit record high as average UK home now costs staggering £336,000

Property sales prices have hit a record high for the third month in a row, pushing the typical price tag across Britain to £336,073.

The price of homes coming to the market increased by 0.8%, or £2,509, on average in June, according to Rightmove.

It said asking prices across all regions have risen – despite Office for National Statistics (ONS) figures last week showing the average UK house price fell by £5,000 in April after reaching a record high in March – the month when a stamp duty holiday was originally due to end.

The ONS house price index is less timely than Rightmove’s data as it is based on completed sales at the end of the conveyancing process, rather than the prices that sellers are looking to achieve.

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Tim Bannister, Rightmove’s director of property data, said: “Record low interest rates and stamp duty tax reliefs have helped many to afford higher prices, satisfying their pent-up desires for a new home fit for a new era.

“Some of that demand has now been met, and the phasing out of stamp duty reliefs has also taken away some of the urgency to move, though our high traffic and search data indicate that there is still strong buyer demand. This super-charged activity cannot go on forever, but we expect the market to remain vigorous for at least the remainder of the year.”

Demand is particularly high for “top of the ladder” detached homes with four bedrooms or more with the number of sales agreed for properties priced over £500,000 up by 49% in May compared with May 2019.

The housing market as a whole has seen an average price rise of 7.5% since March 2020, or £23,448. But average prices for top of the ladder homes have increased by £67,394, or 12.3%, during this period. Prices of newly marketed properties in Wales are up by 14.6% since March 2020 – the biggest rise in Britain, Rightmove said.

The second largest price rise is in the South West, where price tags are up by 11.4%.

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Mr Bannister continued: “Average prices in Wales are well below the national average, offering good value as well as beautiful rural and coastal surroundings.

“Buyer demand is up by 44% compared to a year ago, the highest increase of any part of Britain. The South West has been long-established as a second home hotspot, but has seen renewed impetus from main residence relocators being unshackled from the traditional locations for their daily commute.”

Matt Barry, director at Astleys estate agents in Swansea, said: “We’re now regularly receiving offers from multiple buyers per property. This often results in us requesting best and final offers and homes selling for far in excess of the original asking price.”

Nick Leeming, chairman of Jackson-Stops, said: “There were 18 buyers chasing every listing across our branches in the South West last month as towns and villages which were once out of reach to five-day-a-week commuters now present realistic options for hybrid or remote workers.”

By Brett Gibbons

Source: Kent Live

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Greater Manchester and Merseyside both see 20% house price rises

House price growth rates continue to climb strongly in England and Wales with prices increasing by a whopping 20% in both Greater Manchester and Merseyside, according to the latest e.surv Acadata House Price Index.

House prices are up 13.4% on an annual basis with the average house price now standing at £343,658.

The lowest growth has been seen in London where 10 boroughs reported annual price falls.

Richard Sexton, director at e.surv, said: “Overall, we can see the market continues to enjoy the effect of the government’s stamp duty holiday.

“Buyers are still striving to complete purchases in time to benefit from the maximum tax break ahead of the change in June to a tapered deadline.

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“Completion prices for transactions funded by both mortgages and cash grew by a startling 13.4% annually in May, and at a national level, prices in England and Wales rose on a monthly basis by some £1,800, or 0.5%.

“However, it is notable that the monthly price increases over the last three months are the lowest since June 2020, probably a reflection of the rapidly approaching end of the stamp duty holiday.

“Regionally, there has been continued price growth across Wales and all nine English regions. Prices performed particularly strongly in the North West which achieved its highest rate of annual house price growth,18.4%.

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“Growth in the North West is underpinned by activity in both Greater Manchester and Merseyside, where prices are increasing at a staggering annual rate of 20.9%. London and the South East have also seen growth, although at a lower level. It should be remembered that London property prices have already experienced a boom in the years following the global financial crisis, a rise not experienced by many other UK regions.

“Our property type data shows there has been a shift in the kind of homes that buyers are looking for.

“Working from home has encouraged interest in larger homes with gardens outside city centres.

“The demand for flats in central and inner areas of London and other cities has not been as strong as for other types of homes due to lifestyle changes and new working arrangements, alongside the absence of overseas buyers in prime central London due to COVIDrestrictions. The impact of the pandemic on flats has been amplified by the issues surrounding cladding for mortgage lenders.”

Source: Mortgage Introducer