Market Updates Book a Property Valuation

The Office for National Statistics (ONS) reported that in the second quarter of 2015, the UK economy grew by 0.7 per cent, compared to 0.4 per cent in the first quarter. The Bank of England forecasts that, for the year as a whole, the UK economy will grow by 2.8 per cent, maintaining the same momentum as shown last year, when the economy expanded by 3 per cent – its best result since 2006. The Confederation for British Industry (CBI) has also upgraded its forecasts for this year at 2.6 per cent and next year at 2.8 per cent, based on an expectation of increased household spending, robust investment growth and an interest rate increase to 0.75 per cent in the first quarter of 2016.

The CBI’s revised forecast arose from recent ‘more hawkish’ comments by the Bank of England’s Monetary Policy committee (MPC). At the beginning of the month, the MPC voted by eight to one to leave the Bank Rate at 0.5 per cent, while unanimously agreeing to maintain the size of the Asset Purchase Programme at £375 billion. At the same time, the Bank of England Governor, Mark Carney, warned that the first base-rate rise in more than six years was drawing closer, possibly by February 2016, and that it would climb higher sooner. The Bank simultaneously released its latest Quarterly Inflation Report, which indicated that it expected inflation to be back to its target rate of 2 percent in two years’ time.

In mid-August, the ONS announced that inflation turned positive again in July, with the Consumer Prices Index (CPI) measure rising to 0.1 per cent from zero in June; a smaller fall in the price of clothing was reported to be the main reason, although it was partially offset by falling food and non-alcoholic drink prices. The CPI has been almost flat for the past six months, having turned negative in April for the first time since 1960. The Retail Prices Index measure of inflation was unchanged at 1 per cent.



In the middle of June the Office for National Statistics (ONS) reported that inflation, as measured by Consumer Prices Index (CPI), rose to 0.1 per cent in May, up from minus 0.1 per cent in April; the biggest contribution to the rise came from transport, notably air fares. The May Retail Prices Index (RPI) inflation, a separate measure which includes housing costs, was 1.0 per cent, up from 0.9 per cent in April.

Meanwhile, the June minutes of the Bank of England’s Monetary Policy Committee revealed another unanimous vote to hold the interest rate at 0.5 per cent and maintain the size of the Asset Purchase Programme at £375 billion.

More recently the ONS confirmed that the economy grew by 0.4 per cent in the first three months of the year compared to an earlier estimate of 0.3 per cent. The ONS recently revised its methodology for measuring construction output, which has resulted in the revised estimates of overall growth. The annual growth to March was also revised upwards from 2.5 per cent to 2.9 per cent. For 2014 as a whole, economic growth was revised upwards to 3.0 per cent, the fastest pace of growth experienced since 2006.

A recent Markit survey indicates that business activity in the Eurozone rose at its fastest pace in four years in June, apparently boosted by higher spending by consumers and businesses. It suggests a second-quarter economic growth of 0.4 per cent, despite concerns over the possible exit of Greece from the Eurozone.

Markit’s June survey of the construction industry shows that activity grew at its fastest pace since February with residential house building continuing to be the fastest growing area. The survey also reports that confidence in the sector concerning the coming 12 months is at its highest for 11 years. Nearly two-thirds of construction companies envisage a rise in activity resulting from increased investment spending among developers and a robust demand for new residential projects. The survey also found that construction firms are hiring staff at the fastest pace in six months.

The newly released Markit survey of the services sector shows that it strengthened in June, more than expected by analysts, although growth in the manufacturing sector slowed to its lowest pace for more than two years.


LAND REGISTRY DATA: MAY 2015 (released 26 June 2015)

The May 2015 Land Registry data show no monthly change in average house prices across England and Wales as a whole, compared to an increase of 0.9 per cent in April. The East and the North East regions saw prices rise by 1.6 per cent, the North West by 1.1 per cent and the South East at 0.9 per cent, while London saw a monthly increase of only 0.7 per cent; Yorkshire & the Humber and the South West experienced falls of 0.6 per cent, while Wales saw the largest monthly decrease with a drop of 1.7 per cent.

London and the South East showed the highest annual change at 9.1 per cent, followed by the East region at 8.8 per cent, while Wales saw the only annual price fall with a decrease of 0.6 per cent. The overall annual growth in prices dropped for the eighth month in a row to 4.6 per cent making the average house price in England & Wales £179,696 and £475,961 in London. By property type, detached properties showed the highest annual increase at 5.2 per cent.

In greater detail, 18 counties and unitary authorities saw an annual fall in prices, two more than in April, the greatest being Middlesbrough at minus 7.2 per cent; Reading showed the highest annual rise at 13.3 per cent. Stockton-On-Tees experienced the strongest monthly growth with an increase of 5.8 per cent, while Halton saw the most significant monthly fall with a movement of minus 2.8 per cent. Nine counties and unitary authorities saw no monthly price movement.

Of the metropolitan districts, Wolverhampton showed the largest annual price rise at 7.8 per cent, while Bolton again experienced the greatest annual fall at minus 3.8 per cent. Knowsley saw the highest monthly price increase at 3.3 per cent, while Salford had the greatest monthly fall at minus 1.6 per cent.

Of the London boroughs, Newham maintained the highest annual price rise at 17.5 per cent, while the City of Westminster experienced the lowest annual growth at 2.7 per cent. On a monthly basis, Kensington & Chelsea showed the highest increase at 2.4 per cent, while Camden saw the greatest monthly fall at minus 1.2 per cent.

The volume of properties sold in March 2015 was 12 per cent lower than in March 2014 in England and Wales and 20 per cent lower in London; properties sold for more than £1 million fell by 6 per cent in England and Wales and by 5 per cent in London over the same period.

Month on month, the total number of properties sold across England and Wales increased by 9.6 per cent from 54,103 in February to 59,311 in March, compared to an increase of only 1.8 per cent between January and February. Increases were seen across all price brackets. The number of property transactions from December 2014 to March 2015 averaged 61,789 per month, compared to 69,282 over the same period a year earlier.




At the end of May, the Queen’s Speech confirmed that a new Housing Bill will be introduced, which will support home ownership and extend the ‘Right to Buy’ to 1.3 million housing association tenants. It will also introduce ‘sweeping new measures’ including a ‘Right to Build’, which will give people ‘the right to be allocated land with planning permission for them to self-build or commission a local builder to build a home.’

Meanwhile, research carried out on behalf of BBC Radio 4’s File on 4 programme by Glenigan, a leading provider of construction data, says that the number of new homes being approved on greenbelt land in England has increased five-fold in the last five years from 2,258 in 2009/10 to 11,977 in 2014/15. Another survey for the programme by Natural England has reported that 37 per cent of local planning authorities had housing allocations in or around Areas of Outstanding Natural Beauty (AONBs).

The latest data on mortgages from the Bank of England shows that approvals in April increased to their highest level for 14 months. The numbers rose by 10 per cent from March to a total of 68,706 in April, the biggest month-on-month increase since 2009. Nevertheless, this is way below the peak reached in November 2006 of 129,996. Although tight strictures are in place on lending, a strong labour market and record low mortgage rates are still supporting the market.

The Office of National Statistics (ONS) reported that overall construction output in April fell by 0.8 per cent, reversing March’s 1.4 per cent increase, but new housing projects contributed to a 1.6 per cent increase in all new work during the month. May output figures from The Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) showed a slight rebound in construction, chiefly driven by a ‘sharp but accelerated increase in residential building activity’. Markit also reported a growth in new work, which was attributed by survey respondents to improved underlying client confidence following the General Election.

The ONS has recently revised its methodology for measuring construction and now says that output fell by only 0.2 per cent in the first quarter of the year, rather than by 1.1 per cent as previously thought. While construction accounts for only 6.4 per cent of Britain’s economic output compared to the service sector’s 77 per cent, the ONS revision could bump up the overall economic growth for the quarter to 0.4 per cent, rather than 0.3 per cent as forecast in April.

A recent survey of more than 800 companies by The Confederation of British Industry (CBI) suggested that all sectors of the economy are growing. The main driver of the acceleration is the services sector, which recorded its fastest growth in business volumes since February 2006.


Record Breakers

The mortgage market is ultra competitive at the moment as lenders fight it out to catch the eye of potential mortgage borrowers.  That competition has reached such intensity that mortgage rates have been cut to new lows in a bid to capture business.

These rates have clearly been designed to hit the headlines.  In recent months we have seen a couple of lenders push below the 2% barrier on 5 year fixed rates and 2 year fixes were also nipped a little as they edge nearer to 1%.

It’s not just fixed rates either as lenders look to differentiate themselves from their competition.  Some changes to tracker rates have also resulted in the lowest rates ever offered.

This is all good news for borrowers, although it’s important to note that most of the lowest rates on offer will still require a large deposit and can carry large fees, often in the region of £1,500 to £2,000.  As a result, in many cases the very lowest rates will not be the best overall deal and borrowers should consider if a slightly higher rate with a lower fee could offer better value.

However, these lower benchmark rates do tend to force other lenders to consider a cut in order to stay in the hunt.  It’s not all one way traffic though and there have been some increases too.

Those record breaking 5 year rates did not result in a rush of other lenders following suit and they have subsequently been withdrawn.  That’s also true of many of the long term 10 year fixed rates, which have nudged up slightly in recent months.

With some of the new, lower rates undercutting the competition by as little as 0.01%, it does feel like we may now be nearing the bottom.  Although economists suggest that a rise in interest rates could still be some way off, many borrowers have recognised that the mortgage deals on offer at the moment provide a fantastic opportunity to lock in at a low.


Guild Mortgage Service, Provided by London & Country Mortgages