Wrapping up the year...

No surprises the BoE left base rate at 4.75%. What was slightly surprising was that the vote 6-3, meaning 3 of the MPC members voted to cut rates to 4.50% even with data releases in the run up to the meeting. Market consensus expected the vote to be 8-1. The 3 MPC members that voted for an immediate rate cut cited concerns that weak demand could lead to inflation falling too far below the 2% target in the medium term. In contrast, not all members feel weaker activity means weaker medium term inflation and Gov Andrew Bailey saying “a gradual approach to interest rate cuts remains right” which paints the picture than the MPC overall haven’t changed their stance despite the weak activity in the economy.

?So it’s onto next year to see what unfolds and on that note please see the final update for 2024 below…

?Grab brew and watch our Head of Business Development Paul Fenn’s 2024 highlights clip with a festive twist… 2024 highlights with Paul Fenn

?UK Finance 2025 Forecast

?*The initial UK Finance forecast for 2024 at the start of the year ￡215bn and we are on track to achieve c￡237bn in 2024 based on Bank Of England Data*

Source UK Finance

Mortgage Market Trends – A look at the latest Data

The most recent data on the UK mortgage market shows some interesting patters. The trends show the market is still active but with a few warning signs. Resi mortgage balances increased 0.6% from the previous quarter to ￡1.67 Trillion, the highest it’s been since the beginning of 2023 and 0.8% higher compared to the same period last year.

The value of new mortgage lending rose by 8.9% from the last quarter to 65.5 billion, the highest since late 2022 and 6.7% higher than a year ago.

While more mortgages are being advanced, agreements to lend in the coming months dropped by 1.3% in Q3 to ￡66 billion but is still a huge 34% higher than last year.

Mortgages with LTV’s exceeding 90% LTV increased to 6.6%, the highest since 2008. Which is a good sign for struggling FTB’s.

Mortgages to owner-occupiers increased 6.9pp form the previous quarter making up 64.4% of mortgage in Q3. Whilst, remortgages for owner-occupiers dropped to 22.8% and BTL mortgages decreased to 7.9% of new mortgages.

There’s good news when it come to arrears, new cases of borrowers falling behind on payments dropped by 1.3pp to 9.7% and is 6.3pp lower than last year. However, the total value of mortgage balances with arrears remains 17.5% higher than a year ago, despite it falling slightly this quarter. Source Bank of England.

GDP

GDP fell by -0.1% month on month following a similar decline in September. Market commentators are questioning how much of this may be temporary due to activity being put on hold pre-budget, but based on the fact the economy has only grown in 2 of the 7 months leading up to October, this suggests otherwise. Then when you factor in the initial reaction to budget, this could mean more activity may have been put on hold. Forward looking indicators suggest a further quarter on quarter decline of 0.2% but these don’t take into account increased Government spending. This has resulted in some economist to re-forecast their GDP forecast for 2025 downwards. Source ONS.

Labour Market

Average earnings including bonuses increased to 5.2% from 4.4% in the 3 months to October (market expected it to be 4.6%) and the second consecutive month of rising wage growth.

Unemployment remained at 4.3%.

PAYE measure of employment down 35,000 to 30.4m.

Job vacancies fell by 10,000 to 818,00.

The positives, the BoE will take some comfort that the labour market continues to slacken and the possibility that wage growth may soon start to ease again with the increase in employers NIC announced in the budget. Source ONS.

?Inflation

Inflation edged up for the second month to 2.6% in November in line with market expectation.

Both services & core inflation remain well above the 2% target.

Capital Economics economists are forecasting that inflation drops to 2.5% in December, followed by a rise to c2.8% in January. They forecast that in the first half of 2025 inflation will be higher than most expect but will still fall to the 2% target by the end of 2025. But with any forecast, market conditions can change and impact at any time. Let’s see how close they are by end of next year. Source ONS.

The BoE will be concerned about GDP activity being weaker than they would like and at the possibility of the economy contracting in Q4. But they are prevented from stimulating the market with base rate cuts by the rise in wage growth and inflation.

Rightmove has reported that estate agents have sold 22% more houses over the past month than in the same period in 2023, while the number of prospective buyers actively house-hunting has increased by 13% over the same period. House sales leap 22% thank to lower mortgage rates

The Insolvency Service has reported that after seasonal adjustment, the number of registered company insolvencies in England and Wales was 1,966 in November 2024, 13% higher than in October 2024 (1,743) and 12% lower than the same month in the previous year (2,243 in November 2023). Commentary - Company Insolvency Statistics November 2024 - GOV.UK

Land Registry has forecast that the number of family homes given away 'free' to children to avoid inheritance tax will increase by 45% year-on-year to 220,000 in 2024. Over 200,000 families to give away homes to avoid inheritance tax

FCA study found that 66% of young investors take less than 24 hours deciding on an investment, while one in seven finalise their decision in less than an hour. Interestingly, 51% of young investors switched from their original investment decision and invested in something different because of 'FOMO', resulting in a riskier investment decision. FCA finds two-thirds of young investors take less than 24 hours to make investment decisions | FCA

Halifax has forecast modest house price growth in the range of 0% to +3% for 2025, along with a further small increase in the number of transactions. Halifax – Market news

ONS has reported that average UK house prices increased by 3.4%, to ￡292,000, in the 12 months to October 2024 (provisional estimate); this annual growth rate is up from 2.8% in the 12 months to September 2024. Private rent and house prices, UK - Office for National Statistics

Wishing you all fun packed and joyful festive period and a successful 2025!