Mortgage Approvals Hit Highest Level in Nine Months

U.K. mortgage lending reached a nine-month high in March, a possible sign that stability is returning to the housing market. The number of home-loan approvals climbed to 39,980, almost 6 percent higher than a year earlier and the most since June 2018, lobby group UK Finance said The pickup came as a surprise to economists, who had expected to see a further slowdown last month. The housing market has been hit by Brexit uncertainty, particularly in London, and mortgage approvals remain well below the levels posted two years ago. Annual growth in consumer credit accelerated to 4.1 percent, the highest since June last year. Read more on the Bloomberg website.

https://www.bloomberg.com/news/articles/2019-04-26/u-k-mortgage-approvals-hit-highest-level-in-nine-months

Mortgage Approvals Little Changed as Interest Rates Rise

U.K. mortgage approvals were little changed in November and net lending was below its recent average, according to the Bank of England. Approvals were at 65,139 compared with 64,887 in October, the BOE has said. The figure was higher than economists had forecast. Net mortgage lending amounted to 3.5 billion pounds, versus the 3.7 billion-pound six-month average. The data cover the same month the central bank raised interest rates for the first time in a decade, creating further headwinds for a housing market that has been losing momentum since the Brexit vote in 2016. Read more on the Bloomberg website.

House Prices Rise as Supply Fails to Match Demand

A gauge of U.K. house prices rose to a seven-month high in November as the supply of properties for sale failed to keep up with a moderate increase in demand. The Royal Institution of Chartered Surveyors said its index rose to 30, the strongest reading since April, and that “supply shortages remain a constraining feature” in the market. Respondents to its monthly survey expect prices across the country to rise in the coming three months, but were less confident about London’s prospects because of tax changes. RICS said a slowdown in transaction activity may indicate that the current strength in the housing market may not last. Read more on the Bloomberg website.

U.K. Adds Housing To List Of Inflation Measures

The U.K.’s chief statistician said a measure of inflation including housing will become the favoured gauge of consumer prices from March.  CPIH -- the consumer prices index including owner-occupiers’ housing costs -- will be the “preferred measure” of inflation for the Office for National Statistics. Switching to the new index will address several flaws and limitations in alternative price measures and simplify the current plethora of different gauges. A spokesman said: “At the moment we have an alphabet of inflation measures so it’s important there’s more clarity about what we think inflation is doing. By including housing costs, CPIH is a better measure of inflation that people face up and down the country.” Read more on the Bloomberg website.

Landlords Bruised by U.K. Tax Rise Could Face New Loan Limits

The U.K.’s amateur landlords, already bruised by higher taxes when they buy rentals and lower rates of tax relief, could be facing a new blow. George Osborne told lawmakers in October that Bank of England will get powers to regulate the so-called buy-to-let market as soon as possible. The central bank may move as soon as Tuesday’s meeting of the Financial Policy Committee to curb lending for rentals. Governor Mark Carney moved to limit the riskiest loans to homeowners last year by setting loan-to-income limits for some mortgages. Lending to landlords soared afterward, leading Jon Cunliffe, the Bank of England’s deputy governor for financial stability, to warn that investors could amplify an adverse shock to the housing market because they might seek to sell their rentals. Read more on the Bloomberg Business website.

Inheritance Tax Cut Would Push Up House Prices

David Cameron’s plan to lower inheritance tax and compensate for it by increasing tax on the pensions of the wealthiest was described as being likely to complicate the system and raise house prices.  The prime minister promised to raise the inheritance-tax threshold for couples to £1 million with an additional £175,000 allowance for each partner when leaving their primary residence to their heirs.  The proposal was attacked by Paul Johnson, director of the independent Institute for Fiscal Studies as likely to push more money into housing. “It is rather odd to give this special treatment to housing, given that owner-occupied housing is already extremely tax privileged,” Johnson told the BBC. “Anything that does something like this, which increases the tax privilege associated with an asset like housing will drive the price up in the long run.” Read more on the Bloomberg Business website.

How U.K.’s Austerity Cost London 6,300 Affordable Homes

London’s affordable housing investment will pay for about 15 percent fewer properties than it would have three years ago because of soaring construction costs, consulting firm EC Harris LLP said. The city government will spend £1.25 billion constructing 45,000 affordable homes in London up to 2018. If it had been invested in 2012, when the construction market was at a low point, the money London is spending now would have built 6,300 extra homes and created 2,000 jobs a year. Read more on the Bloomberg website.

Clegg Promises to 'Break Taboo' On State Support for Housing

State money should be used to support construction by councils and housing associations, the deputy prime minister has said.  In an interview yesterday, where he outlined the Liberal Democrat’s position on the economy, Nick Clegg said: ‘Let’s break the taboo, certainly that exists in the Conservative party, of doing the necessary to build the houses we need. This is now emerging as one of the big long-term structural problems with the economy. Not only is it unfair because it prices young people out of the market altogether, it’s actually a threat to the systemic stability of our financial system.’ The deputy prime minister said he would use state funding to build 300,000 homes a year. Read more on the Bloomberg website.

U.K. Should Buy Homes to Stimulate Economic Growth

The U.K. government should set up a body to buy homes to help Britons reduce their debts and increase spending, according to Royal Bank of Scotland Group Plc (RBS) economist Richard Barwell.  Current policies are limited in their ability to stimulate the economy as Britain is being held back by a “balance-sheet recession,” Barwell said. The proposal would target homeowners who are holding back spending because their mortgages are worth more than the value of their property or who don’t have much equity in their homes, he said.  “If that fraction of the mortgage population is sufficiently large, then when coupled with those households struggling with the burden of unsecured debt, we could arrive a material fraction of the population that may be unwilling to increase spending in response to monetary stimulus,” he said.  The program would see authorities setting up an institutional buy-to-let investor to which individuals could sell their property, remain as rent-paying tenants and use the proceeds to pay down their mortgage, Barwell said.  Read more on the Bloomberg Businessweek website.

Residential Property Shortage to Persist: Shapps

The U.K. is unlikely to ever develop enough houses and apartments to meet the demand of its population, Housing Minister Grant Shapps said.  Britain needs to build around 245,000 residential properties annually in the decade through 2023 to meet demand, according to the Department for Communities and Local Government. That would leave a shortfall of at least 43,000 homes a year for the next five according to estimates.   “There isn’t one thing you can do to solve this,” Shapps said. “In the really best possible imaginable circumstances, the boom in the housing market, we were still only building 170,000,” he said. “If you couldn’t do it then, it’s even harder now.  We won’t get to the total unless we’re living in a much better economy,” he. “Today, we’re facing an incredibly tough global economy, euro-zone crisis, problems with mortgages, household incomes.”  Read more on the Bloomberg website.