Weekly Update 26th July 2024

I've been off on annual leave for a few weeks and not much has really changed from the last update. The UK summer is proving to be as reliable as our football teams! If you’re reading this while staring at grey drizzle-soaked landscape, know you’re not alone, if you’re further south could you please send some sun “up North” as I’ve got a DIY garden patio to finish, and the weather has hindered it’s progress. Tool hire companies must be making a fortune with the amount of people having to rent cement mixers for weeks on end waiting for a spell of good weather. Ok, onto the update…

Introducing the Skipton Group Home Affordability Index.

The Index reveals for the first time the stark reality of securing a home in Great Britain today. Created in partnership with Oxford Economics, it utilises data from across Skipton Group businesses, the Office for National Statistics, the Bank of England and third-party external sources to provide unique insight on the affordability challenges faced by renters, first-time buyers and homeowners by age, income, geography and family-type.

·???????? Only 1 in 8 potential first-time buyers in Great Britain can purchase the average first-time buyer property in their area.? This falls to just 1 in 100 for those earning ￡22,850 or less.

·???????? Almost 80% of potential first-time buyers have insufficient savings for the deposit needed to get onto the property ladder in their area.

·???????? 4 in 10 renters are spending 45% or more of their income on essential housing costs creating a major barrier to saving for a deposit.

·???????? Wales, West Midlands and London identified as the least affordable areas in Great Britain.

?You can see the Affordability Index here: Skipton Group Home Affordability Index - Skipton Group

Not much has changed in the economy either. Services inflation is still running rampant, wage pressures remain high enough to cause concern for the BoE and the potential driver of economic recovery will also be playing on the minds of the MPC.

In June, the UK's Consumer Price Index (CPI) inflation aligned perfectly with the BoE’s 2.0% target, but a closer look reveals ongoing concerns. Despite overall inflation meeting expectations, services inflation stubbornly remained at 5.7% and did not decrease as forecasted. This indicates underlying issues beyond temporary factors mentioned in previous updates.

In addition to the above, the BoE will likely be concerned if the recent uptick in economic activity is more demand driven rather than supply driven. If the uptick is driven by a surge in consumer demand, it can lead to higher inflation. An increase in demand for goods and services without an increase in supply can push prices up. Whereas if it’s driven by an increase in supply, for example productivity or increased labour force, this is less likely to result in inflationary pressures. Month on month GDP grew 0.4% in March against market forecast of 0.2% - if this trend continues it could mean the MPC don’t need to act as swiftly with a rate cut.

Employment increased by c19,000 in the 3-month moving average to May, slightly ahead of market forecast. Unemployment remained at 4.4% in line with forecast. Wage pressure growth eased with average earnings including bonuses decreasing to 5.7% form 5.9%, and average earnings excluding bonuses decreasing at a faster pace to 5.7% from 6%, again in line with market expectations. The view continues that this trend will continue as we move through the second half of the year as the market is forecast to soften. This might help ease inflationary pressures further in the areas the BoE are focusing on, as above. The question is, will it be at the pace they want to see?

All of the above gives a mixed bag, and many economists and market commentators feel the chances of a rate cut in August have now moved to September… or even later in the year.

A look into next week we have Mortgage approvals and mortgage lending stats due out 9.30am on Monday 29th, then a busy day on Thursday 1st August with Nationwide’s House Price Index data release, Manufacturing PMI and last but not least, the MPC rate decision.

Data Sources: Consumer price inflation, UK - Office for National Statistics, Labour market overview, UK - Office for National Statistics (ons.gov.uk), GDP quarterly national accounts, UK - Office for National Statistics (ons.gov.uk)

Nielsen Report Weekly News Summary:

Other economic:

The IMF has warned the Labour Government that the UK economy will need to grow at three times 2024's expected economic growth rate to avoid a 'black hole' in the UK's public finances. (ft.com)

Public First poll found 45% of people are optimistic about the future following the General Election compared to 43% who were pessimistic before the election. Optimism surges in Britain – but how long can Labour’s honeymoon last? | Keir Starmer | The Guardian

Asda and the Centre for Economics and Business Research have reported that average weekly disposable income has increased by 13.5% - the fastest pace since 2021 - with UK-wide disposable income averaging ￡237 per week during Q2 2024. Weekly spending power among the richest people in the country increased to ￡845, up by 10.6% year-on-year. Londoners’ disposable income exceeds pre-pandemic peak (asda.com)

US Economy grew at 2.8% in the second quarter of 2024, faster than the forecasted rate of 2% and up on the 1.4% growth posted in Q1 2024. This latest performance underscores analysts' thoughts that the case for the Federal Reserve to cut interest rates in September remains strong.US economy regains speed in second quarter; price pressures easing | Reuters

Mortgages:

Bank of England figures suggest that 500,000 homeowners will avoid increased mortgage rates. Figures from the central bank show that there are still 3m borrowers on rates of less than 3%, with around 2.5m of these on deals due to expire by the end of 2026 - leaving 0.5m who will not pay more until 2027 at the earliest. How half a million homeowners will dodge a mortgage rate hike | This is Money

Lloyds Bank research shows that 51% of young first-time buyers are willing to consider “non-traditional routes” to get onto the property ladder – like purchasing with a friend at 24% or sibling at 22%. The survey also found that 48% of young first-time buyers would feel ashamed of borrowing money from family for a deposit compared to just 34% who would feel confident. Half of first-time buyers considering property purchase with friend or sibling - Lloyds Banking Group plc

UK Finance has reported that the value of buy-to-let mortgages has fallen for the first time in around 30 years, with a total 1,980,000 outstanding buy-to-let mortgages in Q1 2024 compared to 2,039,000 in Q1 2023. The trade body also revealed that new loans to buy-to-let investors has fallen by 18% year-on-year to 12,422.?Buy-to-let market shows strain of recent years, despite resilience | Insights | UK Finance

Rightmove has reported that advertised rents outside of London increased by 7% year-on-year to reach a new all-time high of ￡1,314 per calendar month in Q2 2023. However, the Northeast witnessed the highest year-on-year rent inflation in the quarter at 10.3%, followed by the West Midlands at 9.3% and Scotland at 7.9%. Separately, a Citizens Advice survey found 45% of private renters are currently experiencing damp, mould or excessive cold in their home, while 48% of these households have been living with the disrepair for more than a year. Rents hit new record, as average property receives 17 enquiries - Rightmove Press Centre

National House Building Council has reported that the number of homes registered to be built in the period from April to June 2024 has fallen 23% year-on-year to 29,281, while 33,847 homes were completed in Q2 2024 - down 6% in the same period in 2023. nhbc.co.uk/media-centre/statistics/2024/07/23/current-house-building-volumes-must-double-to-meet-labour’s-1.5m-new-homes-pledge

General Insurance:

I’ve included this one for a bit of fun based on my own DIY project mentioned above, although if I my job project wrong it will be a bit more than ￡300. HomeServe survey found that TV-inspired DIY mistakes cost an average of ￡300 to resolve, while adults aged 34 or under are the most likely to be inspired to take on a DIY task after watching it being performed on TV. DIY blunders leave householders ￡329 out of pocket on average, says HomeServe - Mirror Online

Vitality's 2024 Health Claims Report has revealed a 45% increase in the proportion of members claiming between 2019 and 2023. The report also highlighted that 42% of people want health insurance that supports them to be healthier and live longer, and 60% want a policy that makes it quick and easy to access care. Additionally, the insurer flagged up that 64% of its claims now start online. | Vitality

Which? study found that 48% of all people making a claim on their home, travel, motor and pet insurance policies experienced at least one problem in their claim journey. The research found that insurers are also failing in their requirements to their most vulnerable customers. Both Hiscox and Axa are mentioned in the consumer group's press release. Consumer harm in the insurance claims process - Which? Policy and insight

Pensions & Investments:

Legal & General survey found that 14% of workers over the age of 50 are considering an annuity at retirement, with around a third citing the attraction of a guaranteed income and 10% suggesting improved annuity rates had made them consider the option.?Annuity rates in the UK | Legal & General (legalandgeneral.com)

US Securities and Exchange Commission has approved the first spot Ethereum exchange traded funds with trading approved to start from Tuesday 23 July 2024. US SEC approves first spot ether ETFs to start trading Tuesday | Reuters

Consumer Duty:

Smart Money People survey found that 84% of consumers report no improvement in how financial providers treat them following the implementation of the FCA’s Consumer Duty, with health insurers and pension providers receiving the poorest reviews from customers. The survey also detailed key issues consumers have with providers from having no access to human support (48%), untrained staff (34%), no available phone number (32%) and an over-reliance on chatbots (24%). Our latest research - customers see little impact of FCA's Consumer Duty one year on | Smart Money People

ESG:

Santander research reveals that just 17% of UK's sole traders and 20% of the UK's micro businesses have enough resources to become more environmentally sustainable. The research also found that 80% of SME decision makers said environmental sustainability is important when making business decisions, and 84% of small and 94% of medium-sized businesses confirmed they have a sustainability plan in place, but this drops to just 45% among sole traders.Sole Traders and Micro Businesses risk being left behind if they ignore Net Zero transition | Santander UK

Until the next update...

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