Tag Archives: finance-update
UK needs more home lending solutions for retirement, research suggests
More than one in three equity release customers in the UK are still paying off mortgages highlighting the growing need for retirement lending solutions, new research suggests. A study from national specialist Bower Retirement Services shows that 36% of over 55s seen by advisers are still paying home loans and advisers are seeing a surge of inquiries from customers with interest only loans. The firm’s quarterly Adviser Tracker Research report also shows that 68% of equity release specialists have seen a rise in customers with interest only loans looking for solutions. Advisers are also reporting an increase in customers who have considered downsizing as a solution but then decided not to go ahead. Some 23% of clients who looked at downsizing did not go ahead with key reasons including staying near family and friends and not being able to find a suitable home. Around 75% of those who did not go ahead said they wanted to stay near family while 54% could not find a suitable home. Bower believes the recent launch by Santander and Legal & General of a partnership to offer lifetime mortgages as an option to customers facing the possibility of repayment shortfalls demonstrates the growing need for new solutions. ‘The Legal & General and Santander deal is a significant move for the launch of retirement lending but much more needs to be done. Significant numbers of people aged over 55 are paying off mortgages but do not have the range of options they need,’ said Andrea Rozario, chief corporate officer at Bower Retirement Services. ‘Downsizing will be appropriate for many but it is also clear that many want to stay in their existing home for emotional and financial reasons and should be able to do so as long as it is in their best interests,’ she pointed out. She added that one potential problem for clients is their home not being worth what they thought and around 18% of advisers say clients who went ahead with equity release found their house was valued at lower than they had expected. Continue reading
PwC forecasts marked slowdown in UK housing market but no major crash
The UK should avoid a house price crash or a severe recession despite growth downgrades following the decision to leave the European Union, new research shows. UK growth had already eased from around 3% in 2014 to around 2% before the EU referendum due primarily to slower global growth, but the vote to leave the EU is likely to lead to a significant further slowdown. UK GDP growth is forecast to decelerate to around 1.6% in 2016 and 0.6% in 2017 according to PwC’s main scenario in its latest UK Economic Outlook report. Quarter on quarter GDP growth could fall to close to zero in late 2016 and early 2017 in this main scenario, but is then projected to recover gradually later in 2017 as the immediate post referendum shock starts to fade. The UK would avoid recession in this scenario, although the report notes that uncertainties around this central view are significant, with alternative scenarios showing GDP growth in 2017 of anywhere between growth of 1.5% and a fall of 1%. But even this latter relatively pessimistic scenario would not be a severe recession of the kind seen in the early 1980s or in 2008/2009. The main reason for the slowdown is projected to be a decline in business investment, particularly from overseas in areas such as commercial property. Construction companies and capital goods manufacturers could also be relatively exposed to this kind of short term cyclical slowdown, the report says. PwC anticipates a marked slowdown in house price growth, but no major crash. In PwC’s main scenario, UK house price growth is expected to decelerate to around 3% in 2016 and around 1% in 2017. After this initial dip, however, projected house price growth picks up again to around 4% in 2018 and an average of around 5% to 6% per annum in the longer term as persistent supply shortages keep house prices rising faster on average than earnings. PwC estimates that average UK house prices in 2018 could be 8% lower than if the UK had voted to stay in the EU, although this would still leave them 8% higher on average than in 2015. The estimated impact of Brexit varies by region. The report says that average house prices in London could be around £60,000 lower due to Brexit than they would otherwise have been by 2018, in contrast to a reduction of £10,000 in Scotland and just £8,000 in the North East. ‘We think there are four main reasons why the Brexit vote will lead to a slowdown in the housing market in the short term: the deterrence of foreign investment, uncertainty regarding the future of EU nationals living in the UK, a reduction in consumer confidence and turbulence in the banking sector,’ said Richard Snook, senior economist at PwC. ‘While these factors will weigh heavily on the market in the short term, we expect a gradual recovery from 2018 onwards as market… Continue reading
Average house prices in UK continued to rise in May, latest ONS index shows
Average house prices in the UK increased by 8.1% in the year to May 2016, unchanged from the previous month and continuing a run of strong growth seen since the end of 2013. The data from the Office of National Statistics (ONS) also shows that the average UK house price was £211,000 in May 2016, some £16,000 higher than in May 2015 and £2,400 higher than April 2016. The ONS report says that the main contribution to the increase in UK house prices came from England where they increased by 8.9% over the year to May 2016, with the average price in England now £227,000. Wales saw house prices increase by 3.6% over the latest 12 months to stand at £143,000. In Scotland, the average price increased by 4.0% over the year to stand at £141,000 and the average price in Northern Ireland is currently £118,000. On a regional basis, London continues to be the region with the highest average house price at £472,000, followed by the South East and the East of England, which stand at £306,000 and £265,000 respectively. The lowest average price continues to be in the North East at £124,000. London was also the region which showed the highest annual growth, with prices increasing by 13.6% in the year to May 2016. The South East at 12.9% and the East of England at 12.8% also had high annual growth. The lowest annual growth was in the North East, where prices increased by 3.2% over the year. It is low interest rates, increasing employment and wage inflation that are supporting house price growth, according to John Goodall, chief executive officer of peer to peer platform Landbay. But he pointed out that the index has yet to see the effects of Brexit on prices. ‘What is clear is that a lack of housing supply will remain a crucial issue. Theresa May's new government must now commit to further housebuilding pledges and recognise the increasingly important role the private rented sector plays in the housing mix,’ he added. Rob Weaver, director of investments at property crowdfunding platform Property Partner, believes that housing activity was relatively mute in May due partly to a double whammy of tax changes, namely the stamp duty hike for second homes and the cuts to mortgage interest relief. ‘However, prices appear to be holding and even increasing in many areas due to the fundamental imbalance in supply and demand. Despite a recent slowing down in London, the capital still remains the engine of the housing market in the longer term, showing price rises more than almost double the annual rate of all other regions apart from the South East and East of England,’ he pointed out. ‘Following recent Bank of England announcements on softening monetary policy, it looks likely home owners mortgage interest payments will remain historically low for much longer than expected. This could help continue to support prices over the next 12 months,’ he added. However, Jonathan Hopper, managing director of the buying… Continue reading
