The Royal Institution of Chartered Surveyors predicts average house prices will rise in Britain by 8% next year and last Thursday the Council for Mortgage Lending revealed that the amount of money lent to borrowers in November rose to £17bn, up by more than 30% on the same period last year. Andrew Bailey, deputy governor of the Bank of England warned homebuyers there will be a clampdown on house purchases if there is any evidence that rising prices are spiralling out of control. Mortgage lending is overseen by the Prudential Regulatory Authority (PRA) which has the power to make banks hold back more money on balance sheets for every mortgage offered and can reduce loan-to-value ratios, making products such as 95% mortgages more expensive for homebuyers. Mr Bailey said controls could include strengthening the tests buyers have to go through before acquiring a mortgage and increasing the amount of capital banks have to hold against household lending.
Advanced economies will get their ‘mojo’ back in 2014 as the UK wins back medal as the fastest growing major European economy next year according to recent headlines. PwC said Britains; brighter growth prospects could also move it in line to be the fastest growing economy in the G7. The UK economy is expected to grow by 3% next year which would move it closer in line with America for the title of the strongest growing advanced economy in the world. There’s an air of optimism, as improving consumer confidence is expected to result in higher business investment. Despite the long journey towards recovery, for the first time people feel things are really starting to pick up.
Shoppers are expected to splash out more than £5 billion in just four days in a boost for flagging retailers. Last weekend was said to be the busiest of the year for the high street with 31 million visits over two days. Barclays predicts that £5.2 billion will be spent on credit cards between yesterday and Christmas Eve and more than £1.1 billion will be spent on Tuesday alone as a vast proportion of people have left their Christmas shopping late due to the fact Christmas falls midweek.
In the FT, the lead LEX story focuses on leverage ratios, the basic measure of a banks’s equity as a proportion of total assets. In a report out yesterday, the Banking Commission of MPs took issue with the government’s decision to stick with the 3 per cent minimum required by Basel III (they want UK banks to be subject to 4 per cent requirement, in line with the original proposals of the Independent Commission on Banking). Lex says while holding slightly more capital might save a bank in a crisis, bigger capital requirements wil restrict the flow of credit into the economy – which is their “trump card” according to the Daily Mail’s James Samon who also looks at the legislators’ report (their second) in his City Focus column. In the Guardian, Nil Pratley says that George Osborne has little excuse not to listen to the report.
Writing in the Times, Ian King says it is unlikely the chancellor will reintroduce taper relief for capital gains tax, as called for by Liam Fox. King believes that other policies, such as cutting employers’ national insurance contributions, would be more likely to boost wealth creation. Meanwhile, writing in The Independent, Alex Johnson says the average asking price of properties for sale in urban areas in England is up 1.9% on this time last year, while asking prices for properties in the country are down 5.1% over the same period, quoting new research from PrimeLocation.com.
House sales in the three months up to February reached a two and a half year high, boosting hopes of a recovery in the housing market. According to RICS, the increase in sales was driven by improved mortgage availability thanks to the government’s Funding for Lending Scheme. RICS said they expect house price to edge upwards in the coming months off the back of the improvement in sales
Recruitment & Employment
A surprise pick-up in public sector vacancies and recruitment by banks has helped push the employment market to its strongest level since before the recession. In banking. 13% more employers increased staffing levels rather than reduced them. Growth in public sector jobs is likely to outstrip the continued rise in private sector employment in Q2, with local authorities and the NHS leading the way.
The Financial Times’ Vanessa Houlder says a rebound in the residential property market has run out of steam, with house prices edging down last month after the end of the stamp duty concession for first time buyers. That’s based on a survey from RICS.
Economists have predicted that the MPC decision on further quantitative easing – due this week – will be “an extremely tight call.” Despite some sign from business that confidence is returning, the Daily Mail says inflation looks set to remain above the Bank of England’s 2% target and growth has yet to show real progress. Experts surveyed by the paper suggest the Bank may hold off from further QE or opt to compromise and inject another £25bn into the economy.
The Daily Telegraph’s Katherine Rushton reports the Labour party has criticised plans by money lending firm Wonga to offer business loans at annual interest rates of up to 180%. Shadow Business Secretary Chuka Umunna called the proposal “a damning indictment” of the British banking system and Stella Creasy MP, who has been leading a campaign against so-called “payday loans” added that the government’s Project Merlin, which was created to ease credit facilities by forcing banks to lend more freely, had not delivered on its aims and left companies “desperate to stay afloat.”
Commenting on the RICS residential lettings survey, Nigel Lewis, property analyst at FindaProperty.com, said:
“Our rental index has also shown a lack of supply forcing rents up over the last few months. Some of our member agents are reporting stock levels down by up to 60% in some parts of central London and the South East,” says Nigel Lewis.
“This is being driven by a lack of churn in the market. There is still a level of uncertainty among would-be buyers and a large number of tenants are deciding to stay in their current rented homes rather than braving the property ladder. Reluctant landlords are also playing a part as they finally off-load their properties now the sales market is picking up. This combination has squeezed the supply of rental property and pushed rents higher.”