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UK interest rates cut to lowest ever at 0.25% in boost for home borrowers
The decision by the Bank of England to cut interest rates in the UK to their lowest ever level at 0.25% is not expected to have a major impact on the general property market but it is a signal that borrowing on a home is not likely to rise in the near future. It is the first time that the interest rate has been cut for seven years and some experts had even been predicting that it might rise but the potential economic fallout due to Brexit has ensured that borrowing will remain historically low. However, some parts of the real estate market could see an effect. According to Andy Pyle, UK head of real estate at KPMG, it will depend on location and price. ‘Whilst a number of overseas investors are being cautious, others are attracted by the depreciation in sterling enabling them to buy more cheaply, and the reduction in interest rates has already had an impact on the value of the pound,’ he said. Adam Challis, Head of residential research at JLL, pointed out that the reduction will signal to mortgagors that cheap mortgage rates will be around for even longer. ‘This will benefit many would be home movers and we are encouraged by the Term Funding Scheme that will ensure lenders pass on most of the rate reduction to consumers,’ he said. ‘More important for the housing market is a strong, stable economy and the rate cut will help. Post-referendum we need greater certainty that will encourage house builders, protect jobs, and ultimately provide a range of housing that people can afford,’ he added. While it will be welcomed by many home owners, Mark Hayward, managing director, of the National Association of Estate Agents (NAEA) explained that for future first time buyers saving for a deposit on their first home they face getting less interest on these savings. ‘It represents a body blow for savers and those hoping to get their first foot on the property ladder. Home owners with outstanding mortgages are currently enjoying some of the lowest fixed rate mortgages seen for a long while, with lenders battling it out to offer the cheapest deal. Cutting interest rates further is likely to improve confidence among those prospective house-buyers who may have put their search on hold, following the Brexit vote in June,’ he said. ‘But for those saving to pay a deposit on a future home, the interest rate cut will be frustrating. The last government focused heavily on supporting first time buyers with the introduction of schemes such as Help to Buy. Many of those looking for help now will have to wait for initiatives such as the Lifetime ISA to launch, which will then only help those under 40 to save for a home,’ he pointed out. ‘The outcome of the today’s rate cut is simple in that we will see aspiring homeowners saving harder for longer, which will no doubt have an impact on… Continue reading
Property prices in Ireland fall month on month for first time since January
Residential property prices in Ireland fell by 0.1% in June, the first monthly fall since January, but are still 6.6% higher than a year ago, according to the latest official figures to be published. This compares to a 0.2% rise in May with the data showing that price growth has slowed considerably from the 10.7% annual rise recorded in June 2015. The figures from the Central Statistics Office (CSO) also show that in Dublin property prices decreased by 0.7% in June and were 4.5% higher than a year ago. House prices decreased by 1% but are still 5% higher compared to a year earlier while apartment prices were 0.5% lower when compared with the same month of 2015. However, the CSO points out that it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series. The price of properties in the rest of Ireland increased by 0.5% in June compared with an increase of 0.4% in June of last year and were 8.6% higher than in June 2015. It means that house prices in Dublin are 33.5% lower than at their highest level in early 2007 while apartment prices in Dublin are 41.8% lower than they were in February 2007. Overall property prices in Dublin are 35.6% lower than at their highest level in February 2007. The price of properties in the rest of Ireland is 35.4% lower than their highest level in September 2007 and the national index is 33.3% lower than its highest level in 2007. The CSO will launch a new Residential Property Price Index (RPPI) for Ireland in early September 2016 which will replace the existing monthly RPPI. ‘The new RPPI will be based on Stamp Duty returns made to the Revenue Commissioners matched with other administrative data. It will now cover all market purchases of houses and apartments by households, both cash and mortgage based transactions,’ said a CSO spokesman. ‘The new RPPI represents a significant methodological improvement over the existing RPPI based on mortgage data from the credit institutions as it includes cash purchases, higher quality source data and more detailed locational characteristics in the price model,’ he added. Continue reading
Pending home sales static in US in June, latest index shows
Pending home sales in the United States were mostly static in June but the latest index from the National Association of Realtors is now at its second highest reading over the last year. However, supply and affordability constraints prevented a bigger boost in activity from mortgage rates that lingered near all-time lows through most of the month and increases in the Northeast and Midwest were offset by declines in the South and West. Overall the NAR’s pending home sales index, a forward looking indicator based on contract signings, was up 0.2% month on month and is 1% higher than June 2015. But it is noticeably down from this year's peak level in April. According to Lawrence Yun, NAR chief economist, a solid bump in activity in the Northeast pulled up pending sales modestly in June. ‘With only the Northeast region having an adequate supply of homes for sale, the reoccurring dilemma of strained supply causing a run-up in home prices continues to play out in several markets, leading to the last two months reflecting a slight, early summer cooldown after a very active spring,’ he said. ‘Unfortunately for prospective buyers trying to take advantage of exceptionally low mortgage rates, housing inventory at the end of last month was down almost 6% from a year ago and home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth,’ he pointed out. ‘Until inventory conditions markedly improve, far too many prospective buyers are likely to run into situations of either being priced out of the market or outbid on the very few properties available for sale,’ he added. One noteworthy and positive development occurring in the housing market during the first half of the year, according to Yun, is that sales to investors have subsided from a high of 18% in February to a low of 11% in June, which is the smallest share since July 2009. Yun attributes this retreat to the diminished number of distressed properties coming onto the market at any given time and the ascent in home prices, which have now risen year on year for 52 consecutive months. ‘Limited selection of homes at bargain prices is reducing the number of individual investors willing or able to buy. This will hopefully open the door for first-time buyers, who made some progress last month but are still buying homes at a subpar level even as rents increase at rates not seen since before the downturn,’ Yun explained. In spite of the slight slowdown in contract signings from April's peak high, existing home sales this year are still expected to be around 5.44 million, 3.6% higher from 2015 and the highest annual pace since 2006 when it was 6.48 million. After accelerating to 6.8% a year ago, national median existing home price growth is forecast to slightly moderate to around 4%. A breakdown of the figures show that in the Northeast the index was up 3.2%… Continue reading
