The key macro-economic, personal finance and property stories from today’s papers, read by Wriglesworth Director James Staunton.
- House prices are likely to continue rising for at least another ten years, George Osborne suggested yesterday when he attacked “Nimbys” for slowing down planning reforms – reported on the front page of The Times by Sam Coates, Philip Aldrick and Francis Elliott. The Chancellor told peers that the shortage of housing was an historic problem as he stressed that the coalition was trying to boost supply as well as providing cheaper home loans to struggling families. “I imagine if we were to assemble again in ten years’ time, we would still be talking about the challenge of making sure that our housing supply keeps up with demand,” he told the House of Lords Economics Affairs Committee. Mr Osborne defended the Help to Buy policy in the face of criticism from Liberal Democrats such as Vince Cable, who suggested last week reducing the maximum home purchase of £600,000.
- While The Sun’s leader is dedicated to energy prices, the Daily Mail looks at miss-selling of superfluous insurance against credit card fraud along with a brief history of miss-selling scandals – from pensions mis-selling scandal, endowment mortgages, and Payment Protection Insurance to interest-rate swap loans and packaged bank accounts. Some 7 million customers of banks such as Barclays, Santander and RBS have been conned into paying up to £1.3billion for policies they don’t need – Lloyds is now implicated as well. The Mail says “though the products mis-sold may have varied, one mystery endures. Why, after this long history of deception and grand larceny, has not a single senior banker been hauled before the courts?…. This fraud won’t cease until the guilty are behind bars.”
- Prince Charles has waded into the battle for residents of Somerset according to the front page of The Times, The Guardian and the Daily Mail. The Mirror and the Daily Telegraph are unlikely bedfellows but not only do they also put Charles’ criticism of the official response to the crisis on the front page – they also run editorials on it. Although it was not overtly political, the Daily Telegraph compared the Prince’s visit (he was greeted warmly) to that of Owen Paterson, the Environment Secretary, who was met with placards and jeers. The Telegraph says the visit “reminded us in what low regard quangocrats – such as the mysteriously absent Chris Smith, who runs the Environment Agency – are held.” The Mirror’s Leader piece, on the other hand says the Prince of Wales criticising the disastrously slow response… “is a royal seal of disapproval on David Cameron’s Government”.
- The Daily Express says “Britain’s overstretched public services are nearing breaking point” blaming immigration. “One in four babies born in this country have a mother who comes from outside the UK, while Afghan and Somali women are having four or more children, more than twice the national average. They will… need medical care before, during and after the birth… and that’s before the needs of schooling and housing even enter the equation…. This simply has got to stop. The Prime Minister has talked grandiosely about bringing net migration figures into the tens of thousands (and even that would be too much in this overcrowded little isle) and yet it has been revealed that net migration from the EU rose to 106,000 in the year ending June 2013, up from 72,000 the previous year. And that was before immigration controls on people arriving from Eastern Europe were lifted in January. Labour’s stance on immigration was one of the wickedest policies it pursued in its 13 years of office, a course of action foisted on the electorate for utterly cynical reasons which has changed the face of this country for ever.” The Express concludes, “Mr Cameron must act to stem further damage. And fast.”
The key macro-economic, personal finance, property and recruitment stories from today’s papers, read by Wriglesworth Director James Staunton.
- Mark Field, MP for the Cities of London & Westminster writes in the Daily Telegraph business section that the interest rate has provided UK business and individuals alike with breathing space. Nevertheless, the real question that should be foremost in the minds of policymakers after five straight years of emergency monetary stimulus, is at what cost to the nation’s long-term economic interests? Field feels the young and middle-class savers who are being significantly impoverished by Treasury policies. He says today’s young people grapple with sky-high rents and house prices, a less secure employment market and increasing personal debt. But, he says, ultra-low interest rates carry a cost – and it’s starting to rack up.
Recruitment & Employment
- Writing in today’s Daily Mail, Work and Pensions Secretary Iain Duncan Smith and Home Secretary Theresa May announce a crackdown on jobless immigrants seeking to access housing benefit. In the Mail’s leaders it backs IDS to the hilt: “Any doubts that Iain Duncan Smith’s crusade against welfare dependency is having the desired effect should be dispelled by an extraordinary set of figures published today. They show that in the last five years of the Labour government the number of British people in work fell by 413,000, while the number of migrants employed soared by 736,000. Yet since the 2010 election that depressing trend has been completely reversed, with 538,000 Britons finding new jobs compared with 247,000 foreigners.” In an interview with The Independent, shadow Work and Pensions Secretary Rachel Reeves has said that a Labour government would deny people unemployment benefit if they are unable to demonstrate that they have the basic skills needed to find work after six weeks on the dole. The Mirror’s leader piece comes out strongly against Reeves’ plans – “Make Jobs, not exams’ is the headline.
- In The Times, Deidre Hipwell reports that criticism of the Government’s Help to Buy initiative from a City financiers who has warned that London’s housing market is overheating, as research shows asking prices are rising by record amounts. Nigel Wilson, the chief executive of Legal & General said house prices in London and the South East had reached “absurd” levels and would soon only be affordable to the wealthy. He said young people were being encouraged to buy homes in “over- leveraged” situations and warned that the Government should stop stoking demand through its Help to Buy mortgage guarantee scheme.
- The Independent reports a fourth capital raise at Metro Bank has brought in £387.5m to aid growth, taking the total equity raised to £641m. Founder and Chairman Vernon W Hill said: ‘The revolution in British banking continues, with strong support from existing and new investors.’ Elsewhere in the sector, Treasury officials are believed to be considering a second sale of Lloyds shares as early as mid-February, following publication of the bank’s annual results on February 13 – that story runs in the Daily Mail.
Optimism about Britain’s economic prospects took a knock after unexpectedly weak official data from the manufacturing and construction sectors was released on Friday. ONS figures said that manufacturing output stagnated between October and November and construction output fell. The news prompted a slight downward adjustment in growth forecasts and took economists by surprise, given that the figures did not tally with unofficial business surveys pointing to swelling output, orders and confidence among manufacturing and construction companies. (FT, p.3) Although public and private housing construction have increased by 10 per cent and 13.8 per cent respectively in the first 11 months of 2013, in November there was also a 3.2 per cent fall in private new housing compared to the previous month. Duncan Kreeger, director at West One Loans said: “Gentle progress is encouraging for the property industry. But it won’t be fast enough to solve the crisis facing families in search of affordable homes, or businesses looking for the right location.” (Independent online)
More than three million middle-aged and retired people have given up saving for old age, believing that whatever they put aside will be taken away to pay for their care, according to new research from Age UK. The charity argues that the Government’s long-awaited overhaul of the care system, which is currently before Parliament, will fail if large numbers abandon saving for later life, because the system relies on individuals contributing to the cost of their care. The research found that almost three in 10 people aged over 50 believe there is “no point” in saving for their future needs.
David Cameron is accused by the Lib Dems of suppressing a report calling for thousands of new homes to be created in two new cities in southern England, in order to ease the housing shortage. (Telegraph, p.1) The proposed new settlements, which would contain tens of thousands of homes, could be built in Buckinghamshire, Warwickshire or Oxfordshire. The Lib Dems argue that the proposals are being side-lined for fear of a backlash in Tory heartlands ahead of the general election.
The number of people moving up the property ladder in 2013 reached a three-year high in 2013 as rising house prices boosted their equity, according to research by Lloyds Bank. Around 337,500 home owners with a mortgage moved last year, a three per cent increase on 2012 and the highest since 2010. (Express, p.22). Meanwhile, the number of £5m+ ‘superhomes’ being sold in London rose by a quarter last year, according to Savills, suggesting that the top end of the London market has not yet been hurt by higher stamp duty, the threat of mansion taxes, or the introduction of capital gains tax for foreign sellers. (Telegraph, p.16, FT, p.2)
All but the absolute banking elite are expected to be disappointed by this year’s city bonuses, according to the Independent (Jonathan Prynn, p.6). Disappointing results and ongoing restricting in a still recovering industry mean that many will be disappointed when informed of their bonuses ahead of annual results next week. A few so-called superbankers are expected to take home up to £6m, while those beneath them expected to take home the same pay or less as last year. A sizeable minority will end up with a “doughnut” – no bonus at all.
Large families are losing up to £400 a week since the introduction of the Government’s weekly benefit cap, which has affected 31,000 households. Figures from the Department for Work and Pensions show that by November more than 2,600 households had lost more than £150 a week or £7,2000 a year. The Times, page 16. The Daily Mail has taken a different view of this – prior to the cuts 33,000 families had “hit the jackpot” under Britain’s “generous” welfare system. Front page. Also page 5, Daily Express …
Francesca Steele looks ahead to 2014 in the Bricks & Mortar section of The Times. On the government pledge to pump £1 billion into infrastructure to unlock housing projects , Stuart Law CEO at Assetz, comments that this pledge is welcome and a boost to supply, creating homes and jobs, is to be welcomed. Forecasts around property prices are also buoyant with Knight Frank predicting an 8.4% rise in property prices this year. According to Mortgages for Business buy-to-let lending will reach £25 billion by the end of 2014 but investors should watch out for the “hidden” amendment to the CGT final exemption period. The Times, Bricks & Mortar, page 6-7.
Thousands of people have wrongly been identified as liable for bedroom tax, including some who now face eviction or have been forced to move to a smaller property as a result of an error by the Department for Work and Pensions. Housing experts believe that as many as 40,000 people could be affected by the mistake. The Guardian, pg 1.
Yesterday three of the UK’s biggest retailers (Tesco, Morrisons and M&S) admitted that their profits had been hit by poor Christmas sales. They blamed a squeeze on shoppers’ spending power and unseasonal autumn weather for falling underlying sales and lower than hoped for profit margins. The Guardian, pg 30, and pretty much everywhere else. This also highlights the changing nature of consumer spending habits with more online shopping and shoppers buying from small convenience stores.
Clifford Chance has adopted a radical approach to recruiting graduates in an attempt to break the “Oxbridge recruitment bias”. Staff conducting interviews are no longer given any information about which university the candidate attended, or whether they came from independent or state school. This scheme is currently the only one in the UK. In its first year, the scheme saw candidates come from 41 education institutions. Independent, page 9.
December was the best month for home lending in six years, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.
There were 77,918 loans advanced to homebuyers in December, the highest number since November 2007. It marked a 40% increase in home loans over the past year, a jump of more than 22,000 approvals from 55,501 in December 2012. Compared to November, home loans increased 10% from 70,758. It was the tenth monthly increase in a row and the largest monthly increase in two years.
Despite an increase in total lending, the volume of lending to high LTV borrowers dipped in December. In the final month of 2013 there were 9,038 loans to borrowers with deposits worth 15% or less of the total value of their property, a 5% decrease from 9,493 in November.
However, high LTV lending is still far higher than this time last year. While total lending has increased by 40% over the last 12 months, high LTV lending has increased at an even faster rate, rising by 60% from 5,661 high LTV loans in December 2012. The figures also show there is still a way to go before high LTV lending will come close to pre-recession levels, with four times as many monthly high LTV loans before the recession, suggesting lending to borrowers with smaller deposits could still be ramped up significantly.
Richard Sexton, director of e.surv chartered surveyors, explains: “There is still a long road to travel before the mortgage market is fully recovered from the hangover of the financial crisis. But the recovery is quickening, and the end is beginning to appear on the horizon. High LTV lending has exploded in the past 12 months, and it is now far easier to take out a mortgage with a smaller deposit saved. There has been something of a festive dip in high LTV lending in the last month, likely to be the result of lower equity borrowers paying for Christmas and delaying their move until the New Year. High LTV lending should continue its recovery in the coming months, but it’s important that Help to Buy remains in place to help support borrowers in building a deposit, enabling them to access better rates, and cheaper deals.”
2013 has been something of a tale of two halves, with the recovery in lending stepping into a new gear in the second half of 2013. House purchase lending increased just 6% in H1 2013, going on to increase by 32% in H2 2013. The recovery in high LTV lending was more evenly spread throughout the year. High LTV lending increased 26% in H1 2013, and a further 27% in H2 2013.
Richard Sexton, director of e.surv chartered surveyors, explains: “The mortgage market had a bumpy beginning to 2013, as fears of a triple-dip recession reigned supreme, and banks were cautious about lending. But while the first half of the year witnessed a moderate uptick in lending, with the seeds of the economic recovery beginning to sprout, the second half of 2013 saw the mortgage market grow at an electric rate.”
More first-time buyers
The number of loan approvals on properties up to the value of £125,000 has increased by 34% in the last year, with 15,584 loans on properties valued £125,000 or under in December 2013, compared to 11,655 in December 2012. It reflects a pick-up in the market, and an increase in the number of lower equity borrowers choosing to move-home or buy for the first-time.
The number of first-time buyers in November 2013 was 28% higher than in November 2012, according to the latest LSL First Time Buyer Tracker, as mortgage rates fell to 3.93% – the lowest on record. But there are warning signs ahead. The average first-time buyer purchase price rose 11% over the year to November, to £149,404.
Richard Sexton, director of e.surv chartered surveyors, explains: “More high LTV borrowers and first-time buyers are looking to buy property now than any other time post financial-crisis. But they are having to fork out more than ever, as prices are driven up by the intense competition for property. Traditionally, first-time buyers have turned to their parents for help building the cash for a deposit – a deposit that is growing larger as prices rise. But inflation has eaten away at many parent’s cash reserves, and this well is beginning to dry up. In order to keep the market accessible for everybody, house building must be ramped up, to prevent the challenge of saving for a deposit form becoming even more difficult.”