Savers ‘missing out on better rates’

Since Thursday’s rise there has been very little movement in rates, although generally it takes at least a week for any rises to be announced and a month for any of those better returns to take effect.

Tom Adams, of comparison site Savings Champion, said that rather than waiting, many people could get a much better deal by moving off an old deal that might pay about 0.5% in interest, or as little as 0.05%, to one of the better buys.

The leading rates for instant access savings accounts are well over 1% so, for many, simply switching to a new savings account would be more lucrative than hoping the base rate increase is passed on to their existing account.

“This year we have seen competition between the newer challenger banks rather than the big High Street names,” he said.

The reason for this, in part, is that the largest banks, particularly, did not need to attract savers. They had money sloshing around from schemes that allowed them access to cheap funds to lend out.

Challenge for customers

The competition view was echoed by Bank governor Mr Carney, who told BBC’s Today programme on Friday that while competition was not the Bank’s direct responsibility, it had created a better-prepared wicket for this to be played out.

“In order to have competition, you need all of the banks to be healthy,” he said.

“That required a lot of repair post-crisis, and… you need a lot of new banks in the system, so we’ve authorised 40 more banks.”

The City regulator has suggested that a minimum savings rate should be considered for longstanding customers, but a widely held view is that savers need to ditch their loyalty and move their funds around.

However Mick McAteer, director of the Financial Inclusion Centre, said that switching would not benefit many households with squeezed finances.

He said many millions of savers did not have sufficient amounts tucked away for a small rise in interest to make much of an impact.

Even a 1% rise in the savings interest rate would only add 20p a week or so to many people’s savings, he said, which was an “immaterial rise” and one that would do little to encourage people to save more.

Interest rate rise UK: Bank of England raises rate to 0.75 per cent in August 2018 – what does it mean for your mortgage?

Around a third of London, borrowers could see the cost of their mortgages rise by hundreds of pounds following August’s interest rate rise.

The Bank of England has voted unanimously to raise UK interest rates to their highest level in almost ten years.

The decision to raise the base rate to 0.75 per cent from 0.5 per cent pushes the Bank rate to its highest level since March 2009.

It is only the second Bank rate rise since the financial crisis in 2008, after a rise in November 2017 pushed interest rates back up from a historic low of 0.25 per cent to 0.5 per cent.

Today’s announcement will come as little surprise after most economists predicted the monetary policy committee’s decision.

The Bank of England raised interest rates today to the highest level for more than nine years

Another interest rate rise of 0.25 per cent was widely expected to take interest rates to 0.75 per cent in May.

However, the disruption caused by the “Beast from the East” that hit this March led to the economy growing by just 0.1 per cent in the first three months of the year and the Bank opted to keep interest rates at 0.5 per cent.

Two more rate rises are expected in 2019 and 2020.

Will I still be able to afford my mortgage after today’s interest rate rise?

“According to Nationwide Building Society, only a third of London borrowers are on variable rates. This means the vast majority of borrowers will see no impact on their mortgage payments have taken advantage of the low fixed rates that have been on offer,” said Colin Payne, associate director at Chapelgate Private Finance.

However, the third of London homeowners on variable rates will see their average mortgage payments pushed up by more than £300 a year as a result of the rise.

Today’s interest rate rise will push up the average mortgage by £26 per month to £1,180, further squeezing household incomes.

 

“In real terms, wage rates are still at levels prevailing in 2005. Moreover, a small proportion of households already have a relatively high debt service burden. For those, some of whom will be on variable rates, any rate rise will be a struggle, even though the impact on the wider economy and most households are likely to be modest,” said Robert Gardner, Nationwide’s chief economist.

That said, while a rise in interest rates may come to a shock to anyone who bought their first home in the past decade, higher mortgage interest will have been factored into lenders’ calculations since new rules were introduced in 2014 to curtail high-risk lending, so don’t panic.

Should I fix my mortgage now?

People on a variable rate mortgage benefit from interest rate changes when the base rate drops. However, mortgage experts agree that today’s announcement heralds a general upwards trend in interest rates.

MarkCarneyinterestratesmortgage.jpg
Mark Carney, governer of the Bank of England, announced the Bank rate rise to 0.75 per cent today (Bloomberg)

This means that borrowers on a variable rate should seek out a new deal now if they can.

“If November’s rate rise was important for its symbolism, today’s rate rise is equally important for its message to the market: the record low interest rate era is over, and interest rates are now headed in one direction,” said Craig McKinlay, sales and marketing director at Kensington Mortgages.

“This rise should be a call to action for those borrowers who haven’t yet remortgaged to get in touch with a mortgage broker and seek a new competitive deal.”

Will house prices go up or down now interest rates have risen?

The 0.25 per cent rate rise may push down already falling London house prices, as the cost of home ownership looks set to rise further.

“It’s not the relatively modest increase in interest rates which is significant – the message it sends about their future direction is far more important,” said London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, Jeremy Leaf.

“The change is likely to compromise already fragile confidence to take on debt in the property market and wider economy.”

London house prices fell for the fourth month running in May to £479,000, a drop of £2,000 off the value of the average home in the capital.

Prices were expected to continue to decline slightly for the next couple of years due to uncertainty over Brexit, combined with the likelihood of further interest rate rises.

“In our regional forecasts we predict price falls in London in 2018 and 2019 of 1.7 per cent and 0.2 per cent respectively,” said Richard Snook, senior economist at consultants PwC.

UK interest rates: Which banks and building societies have passed on increase to customers?

Savers may have to wait months to see the benefit as lenders keep rates low…

 

After the Bank of England’s interest rate hike on Thursday, some high street lenders have again been quick to pass on the increase to their mortgage customers, but many have been less keen to boost savings rates at the same time.

Alistair Wilson, head of retail platform strategy at Zurich, said it could take months before savers see the impact of the rate hike “as with last November’s quarter of a per cent increase, which has only resulted in an average 0.07 per cent rise on easy access accounts.”

HSBC said its tracker mortgages would go up 0.25 per cent on Friday to reflect the base rate while its other mortgage and savings rates will be reviewed.

A spokesperson for HSBC said its savings rates were “not directly linked to the Bank of England base rate”, but said customers will be informed of the outcome of the review “at the earliest opportunity”.

Virgin Money has increased the rate on its tracker mortgage by 0.25 per cent.

RBS, which owns both NatWest and Ulster Bank, has raised the interest rate on its rate-linked products by 0.25 per cent and said it is reviewing its variable rate products.

An update will be provided “ shortly”.

Lloyds Banking Group, which includes Halifax has not yet made any announcement on its variable rate but said: “The 0.25 per cent Bank of England base rate increase will form part of the ongoing rate reviews across our product ranges.”

Rate tracking products will be increased by 0.25 per cent from September, Lloyds said.

Barclays said variable mortgage rates will increase to 5.24 per cent from 4.99 per cent from 1 September. Buy-to-let variable rates will rise to  5.74 per cent 5.49 per cent on the same date and trackers will rise 0.25 per cent.

Santander said it is reviewing all variable rates.

All tracker mortgage products will move in line with the change and base-rate linked loans to UK businesses linked to the base rate will move in line with the change and in accordance with the terms of the deal.

All savings products linked to the base rate will move in line with the increase from the end of August.

A Santander spokesperson said: “When we review rates, we consider both the interest we charge for borrowing money, and the rate of interest we can offer on deposits.”

Mark Carney signals ‘earlier’ interest rate hikes for the UK

TSB said it was reviewing its variable interest rates on mortgages and will make an announcement as soon as possible.

Yorkshire Building Society will raise variable savings rates by 0.25 per cent on variable savings accounts from 14 December. “As a mutual which is owned by its members, it is our priority to deliver highly competitive and sustainable rates for both our savers and borrowers,” the lender said.

Nationwide has not yet announced rates, while the Post Office will raise its variable mortgage rates 0.25 per cent from 1 September.

Powered by Smart Invest UK

How a a £15,000 loan led to a 1,500 residential property portfolio

Empire Property Concepts founder Paul Rothwell tells the Telegraph Business Club about his company’s focus on converting disused commercial property into residential accommodation

Paul Rothwell’s career in property development began while he was a student. He used a £15,000 loan from his dad to buy a house and convert it into flats for himself and fellow students.

When he graduated, he didn’t sell the house but let it out and took out a second mortgage to help fund another.

That was how Empire Property Concepts (EPC) started out, and now, just 13 years later, it has a portfolio of more than 1,500 residential units across various portfolios.

Empire’s response to Permitted Development Rights (PDR) legislation was to set up a new company, Empire Property Holdings (EPH).

EPH issues Loan Notes across several Special Purpose Vehicles (SPVs) to finance EPC’s developments, focusing on converting disused commercial property into residential accommodation.

With interest rates low or negative, these Loan Notes offer sophisticated investors an innovative way to engage in the UK property market.

Statistics

Company website: empirepropertyconcepts.co.uk

Business sector: Consumer & Retail

Location: Doncaster, UK

Annual turnover: £4.5 million

Number of Employees: 16

Year Founded: 2009

East Midlands is Most Confident Region for House Price Growth

Consumer confidence in the housing market has increased by its largest rate since 2016, according to the latest Housing Market Sentiment Survey by Zoopla.

Over eight in ten homeowners (84%) predict house prices in their area will grow by 6.9% over the next six months.

This is a marked increase on the previous survey held in November 2017, when a price increase of 4.9% was forecast by 70% of consumers.

The East Midlands remains the most confident region, with 93% expecting prices to rise compared to 79% in November’s survey, closely followed by the East of England (90%).

Although North Eastern homeowners have the least optimism, market confidence has nearly trebled in the region from 22% in November to 63%. In London, 76% of consumers are anticipating prices in the capital to grow.

However, in terms of the rate at which prices are predicted to rise, homeowners in the West Midlands are the most optimistic, predicting property prices in the region will grow by 10.6% in the next six months.

Zoopla believes that the rise in confidence is a result of wider activity in the housing market, due to a seasonal increase in momentum.

Inflation and poor growth see Bank of England ditch rate rise plans

Interest rates could stay low for as long as another two years, as falling inflation and weak economic growth force the Bank of England to scrap plans to push up rates in the coming months.

Mark Carney is expected to hold rates at 0.5pc at Thursday’s Monetary Policy Committee meeting, postponing a highly-anticipated rate rise for at least three months. The freeze will disappoint savers who have laboured under historically low rates for almost a decade – and a boon to borrowers who get extra time with cheap money.

But economists now suspect that inflation will keep falling quickly towards the Bank’s 2pc target, making it harder for policymakers to raise the rate.

Poor GDP growth at the start of this year and signs of a slowing global economy could also dent the Bank’s longer-term inflation estimates.

If that forces it to cut back its inflation forecast then the case for higher rates could evaporate altogether.

“They are stuck. The Bank can’t raise rates now, the economic numbers have been too weak recently,” said Martin Beck at Oxford Economics. “They should not have raised rates in November, closed the term funding scheme or worried that credit growth was too strong – those three things have contributed to the economy slowing.”

Markets are currently pricing in only two rate rises by August 2019, but George Buckley, an economist at Nomura, thinks even this may be too many if inflation is slowing sharply.

“Should the Bank publish a forecast with inflation below target based on market rates that would be quite a statement, as it would imply that even limited market pricing for rate hikes might prove too much,” he said.

UniCredit’s Daniel Vernazza believes it will be at least another year before rates rise to 0.75pc.

Kallum Pickering at Berenberg Bank fears the Bank has missed its chance. “They should have hiked by this stage of the economic    cycle, but they cannot do it now because of the soft data,” he said.

One Third of Millennials Will Continue to Rent in Their Retirement

The number of families with children living in rented property tripled between 2003-2016…

The Resolution Foundation has proposed a series of reforms aimed at protecting tenants and landlords in the private rented sector.

According to the think-tank’s research, half of all millennials – people born between 1980 and 1996 – will be living in rented property up to their 40s, whilst a third are likely to be renting beyond retirement.

Furthermore, four out of ten millennials aged 30 are already renting, double the rate of the previous generation and four times that of baby boomers, whilst the number of families with children lived in the private rented sector has grown substantially, from 0.6m in 2003 to 1.8m in 2016.

Although they acknowledge the policies the government has introduced to make housing more accessible for first time buyers, the Resolution Foundation argues that more needs to be done to provide greater security for those that rely on renting.

This includes short-term measures such as proposals for indeterminate tenancies, which are essentially open-ended leases. Such tenancies are already in use in parts of Europe, including Scotland.

A new tribunal system could also be created, in order to resolve disputes in a timely and cost-effective manner.

Lindsay Judge, a senior analyst at the Resolution Foundation, notes that support needs to be available across all areas of the housing market: “While there have been some steps recently to support housebuilding and first-time buyers, up to a third of millennial still face the prospect of renting from cradle to grave.

“If we want to tackle Britain’s ‘here and now’ housing crisis we have to improve conditions for the millions of families living in private rented accommodation.”

Number of Build-to-Rent Homes Under Construction Up 47%

The number of build-to-rent properties either completed, under construction or planned has risen significantly across the UK in the past year.

Analysis by Savills, commissioned by the British Property Federation (BPF), reveals there were 117,893 build-to-rent homes recorded across all the stages of development in Q1 2018; a 30% increase on Q1 2017.

Completions, as well as build-to-rent homes under construction, have grown substantially by 45% and 47% respectively, whilst properties in the planning stage have increased by 19%.

Of all the new build-to-rent homes either completed, under construction or planned, 60,530 (51%) are in London, followed by 29,600 in the North West (25%), and 13,009 across the Midlands and Yorkshire & the Humber (11%).

Ian Fletcher, the director of real estate policy at BPF, commented: “The build-to-rent sector is evolving quickly, with significant delivery in the regions and more houses, rather than just apartments, coming forward.

“Policy is also adapting, as to date the sector has grown without a planning blueprint. This is now changing. With the draft revised National Planning Policy Framework, local authorities will now have to specifically identify how many new rental homes their respective areas need.”

Meanwhile, Housing Minister Dominc Raab said: “The 45% increase in completed build-to-rent homes is good news, but we’re restless to do more.

“Our revised National Planning Policy Framework is a crucial next step in supporting the build-to-rent sector, reforming planning rules, and helping to deliver 300,000 homes a year by the mid-2020s.”

Recent analysis from Landbay revealed that rental payments across the UK amount on average to 52% of a household’s disposable income.

Extent of North-South Renting Affordability Gap Revealed

Households outside London spend an average of just over half their income on renting…

Households renting in London are putting a significant percentage of their income towards rent compared to the rest of the country, according to new data from Landbay.

Annual rental growth in the UK, excluding London, rose to 1.21% in March, bringing the average monthly rent to outside the capital.

In London, the average monthly cost of renting is more than double the national average, at 2100

However, the average disposable income for a worker in the capital is per 2455 month. As a result, 89% of their take-home pay is used on renting.

Outside the capital, rental payments amount to just over half (52%) of the average disposable income, which is per 1760 month.

In England, renters in the North East have the lowest percentage (41%) of their incomes going towards rent, followed by Yorkshire & the Humber (43%), the North West (44%) and the East Midlands (44%).

“Rents have continued to rise over the last five years, increasing by 9% across the UK since March 2013 and by 7% in London,” notes John Goodall, CEO and founder of Landbay.

“Not a day goes by when there isn’t more news about the supply-demand mismatch in the UK housing sector and until this is resolved, tenants will continue to rely on the private rented sector to support them.

“With the right property and the right location, there are attractive yields to be had, and consistent rental demand will drive returns in the long-term,” Goodall concludes.

 

Manchester – the UK’s property hotspot

Strong demand for city-centre living, a huge student population and urban regeneration make Manchester one of the best-performing property markets in Britain

Manchester, benefitting from the recent £1bn investment as part of the Government’s Northern Powerhouse initiative, is showing itself to be a vibrant, forward-thinking metropolis with the most attractive city centre investment market in Britain, according to JLL.

The property specialist company rates Manchester as its No 1 prospect for residential price growth over the next five years, with the annual average growth of 4.2pc compared with 2.4pc across the UK. Rents are expected to increase by around 3.5pc per annum between now and 2020.

Pivotal to the recent success of Manchester is a revival in demand for city-centre living

House prices grew by 10pc in 2017, with the average two-bedroom flat now costing £250,000 (an increase of 8.7pc over 2017), and rental prices rose by 3pc, according to JLL’s latest research.

Pivotal to Manchester’s success is a revival in demand for city-centre living – a trend that was at its height before the 2008 recession, which collapsed along with house prices due to sheer oversupply.

In 2000 there were 10,000 people living in the heart of the city. Now there are nearly 70,000, many of them students or young professionals with a desire to live close to where they work and play.

“City living has gained strong momentum in Manchester over the past three years and, together with an active student market, has pushed demand in both the sales and lettings markets noticeably higher,” says Neil Chegwidden, of JLL residential research.

Huge potential: canalside apartments in the Castlefields area of Manchester Credit: Getty

“And with housing supply in the city centre severely constrained, prices and rents have soared.”

For investors with an eye on Manchester, its student population of more than 85,000, spread among four universities, plays a crucial role.

The city has the highest retention rate of students after London, with 50pc choosing to stay after they graduate. Six in 10 Manchester-born students who go to university elsewhere also return to their home town after graduation.

Nick Whitten, JLL’s director of UK research, says: “You can see the reasons. They already know they enjoy living there and there are plentiful employment opportunities and affordable housing.

“More new businesses are coming to the city than anywhere else in the UK, outside London. Many of them are first-time investors in the city, which is a reflection of Manchester’s growing profile.”

Manchester: a market snapshot

4.2%

Average house price growth in Manchester over next five years

£250,000

Average cost of a two-bedroom flat in Manchester

£1bn

How much the government has invested in the Northern Powerhouse initiative

70,000

Number of people now living in Manchester city centre

The young demographic is also a driving force in the number of rental properties in Manchester – which constitute two-thirds of the city centre’s housing stock. A fast-emerging trend is a build-to-rent market, which accounts for a large proportion of the 30 new residential developments currently being built.

“Professionally managed blocks of rental apartments with leisure facilities and concierge services are forcing private landlords to up their game, which is a positive thing.

“Shortly, we could see landlords offering similar white-label services such as local discounts and access to a network of handymen to stay competitive,” says Mr Whitten.

JLL identifies nine Manchester “sub-markets” that offer potential to investors, including the centrally located Northern Quarter, Piccadilly and Castlefields, with its urban canalside living. St John’s Deansgate has become a prime market, with sales there last year regularly exceeding £500 per square foot.

Across the River Irwell, suburban Salford is prominent on the radar of the millennial market seeking a lower-priced, higher-quality alternative to city-centre living.

Focus area: Salford Quays is the UK’s second-biggest media hub Credit: Getty

Salford is also a key focus for buy-to-let investors, with Salford Quays now the UK’s second-biggest media hub, home to 80 media organisations.

“It has the benefits of being well connected to the city centre but better value in property terms. There are 7,500 homes in some phase of development in the Salford City Fringe, and Salford Quays attracts a professional audience, which makes it a good place to invest,” says Mr Whitten.

He thinks that another area to watch is Ancoats and New Islington, whose regeneration is largely funded by the owners of Manchester City Football Club.

As the momentum and investment continue in creating the Northern Powerhouse, Manchester is arguably the poster city and the greatest beneficiary so far, with a new arts centre, two new research institutes and improved transport infrastructure.

It has also seen the highest rate of job creation in the country, with the number of new jobs growing by 84pc between 1999 and 2015.

London’s property market is in a coma

London’s housing market has ground to a halt.

After years of blockbuster growth, home prices have reversed course and are expected to drop further over the next year. The number of sales has dropped, and more homeowners are pulling properties off the market.

The dour outlook comes courtesy of the Royal Institution of Chartered Surveyors (RICS), which warned in a report on Thursday that weakness in London had caused its UK house price indicator to hit a five-year low.

A number of factors have hobbled London’s market.

The government has in recent years hiked taxes on property purchases, making it more expensive to buy luxury housing, second homes and investment properties. Doing so has scared off some wealthy investors and caused prices to slump in central London.

Britain’s decision to leave the European Union has also hurt the market, with potential buyers putting their plans on hold because of the economic uncertainty.

One property professional surveyed by RICS said that Brexit and the tax changes had “killed the liquidity of the London market.”

Related: Renting vs. Buying: What can you afford?

The Bank of England is also expected to keep slowly raising interest rates as the economy grinds forward, making mortgages even less affordable for Londoners.

The average house price in London is £486,000, according to the UK Land Registry.

That’s too high for many first-time buyers, whose finances have been hit by high inflation and small salary rises. But sellers would rather pull properties off the market than accept lower bids.

“Buyers and sellers are currently locked in a stand-off,” said Hansen Lu of Capital Economics.

RICS’ chief economist Simon Rubinsohn said that the slowdown in London “has the potential to impact the wider economy, contributing to a softer trend in household spending.”

He said the dynamic could ultimately impact the Bank of England’s thinking about future interest rate rises.

Still, analysts don’t expect house prices to collapse in London. Inflation has moderated in recent months, employment remains strong and the British economy is growing.

Lu said this should be considered “good news” for the stagnant market.

12 Months To Go: Brexit and the UK’s Defiant Housing Market

On the 29th of March 2019, the UK will leave the EU. There are several key areas of concern across every sector of the country, but what does Brexit mean for UK property, and how is the market confronting the challenges?

In less than 12 months, Britain is scheduled to leave the European Union, following a hard-fought referendum back in June 2016. The negotiations are well underway, with progress being made on key issues, such as the duration and specifics of the transition period, citizens’ rights and future trade deals.

Despite the pervading uncertainty and cooling activity, investor confidence and growth projections for the UK’s property market remain strong, supported by dwindling supply and climbing demand.

2018 is the year when decisions on Brexit must be made, and property investors prepare to adjust to a new status-quo. But is the UK’s post-Brexit future still unclear, and what does it hold for those investing in UK property?

 

Brexit and UK Property

The country has been on something akin to a rollercoaster since Prime Minister Theresa May invoked Article 50 last March, serving the official notification letter to the European Council that formally began the withdrawal process.

Following this, there have been various summits, a gamble of a general election, and the agreement of a vital transition period – which will begin after the UK’s official departure in March 2019 – all aimed at solidifying the UK’s new status in Europe.

While uncertainty is set to dissipate in the final year of negotiations before the UK exits the EU, the property market, like many other industries, has held strong since the referendum in June 2016 – defying expectations.

Despite house prices and rental growth slowing in recent months, the significant falls in property values projected in the wake of the referendum have failed to materialise.

According to data from Your Move and LSL/Acadata, annual house price growth in February 2018 remains positive at a modest 0.6%, while data from the Office for National Statistics (ONS) found that rents increased by 1.1% annually over the same period.

But if Brexit is not behind the deceleration in growth, what is?

 

Construction Industry Brexit

Fundamentally, house price and rent growth in the UK is governed by the imbalance between the supply and demand for properties, with this current slowdown forming a natural part of the property cycle.

As housebuilding construction activity remains subdued, owing to high materials costs and a chronic labour shortage, the supply of homes in the UK continues to fall far short of demand, pushing prices up in a competitive, high demand market.

Yet, this growth has started to cool as property becomes increasingly unaffordable for many prospective buyers. With the cost of purchasing a home too high, many households are turning from the housing market and towards the more reasonable rates available in the private rented sector.

As a result, home sellers are having to be more competitive with their prices in order to attract buyers, despite estate agents registering fewer homes for sale in February, which has caused a modest drag on asking prices.

Midlands Cities Among Top 10 Buy-To-Let Property Postcodes

London commuter belt towns fall down the rankings as Northampton, Leicester and Birmingham surge

Three of the top five locations for buy-to-let property investments are in the Midlands, according to new research.

Northampton, Birmingham and Leicester were all cited as top postcodes for buy-to-let, with strong rental growth of 2.38%, 3.91% and 4.35% respectively, according to independent mortgage lender LendInvest.

Whilst the Midlands regions have been steadily rising up the rankings, the report highlights the South West region as an up-and-coming market, as strong rental growth and healthy market activity has boosted the profile of cities like Bristol, Swindow, Truro and Gloucester.

Conversely, London and the South East continue to underperform, as declining rents deters further investment in these regional markets.

Historically strong performing commuter towns like Dartford, Romford and St Albans have recent begun to slide down the LendInvest buy-to-let rankings, in some cases by as many as 58 places.

However, the report notes that demand for housing will continue to support future growth: “Political changes are increasingly underpinning this uncertainty in the market, however the need for housing around the UK prevails.

“As such, we can expect the rental market to grow, with investors prioritising yields and rental price growth as valuable metrics to consider when purchasing a property.”

Over the last 10 years, rents have grown by 16% nationally, according to figures from Rightmove.