香蕉福利直播

By Paul Broadhead, Head of Mortgage and Housing Policy at the 香蕉福利直播.

This article was first published in .

What a difference a week can make.....

On the 23 September, in its quest to combat rising inflation, the MPC increased the Bank Rate by 0.5% to 2.25%, the seventh rise in 10 months. Market forecasters then predicted that inflation would peak at 11% in October (lower and earlier than previous forecasts), then after remaining above 10% for a few months, it would start to reduced back to single figures.

The following day, the Chancellor presented his tax-cutting mini budget, which the new Government hoped would stimulate the economy and be a crowd pleaser amongst the voters.

The cut in Stamp Duty was cheered by those currently buying a property, giving them a little bit extra in their pocket to put towards home furnishing – money flowing back into the economy as the Government envisaged. And as the cut is permanent it’s less likely to distort property transactions the way previous short-term interventions have done.

But the cut supports demand in a housing market which was already skewed by more people wanting to buy than there are properties available, and therefore risked these tax savings being eaten up within weeks by ever rising house prices. 

The Chancellor made reference to recognising the need to also support the supply of housing, giving a commitment to make unused Government land available for housing. Encouraging words, but the detail is lacking. We need more clarity and timelines, including details of the planned land sales and the housing plans and associated infrastructure for the new investment zones. 

The Chancellor’s inaugural, (unfunded), tax-cutting mini budget, was less of a crowd pleaser amongst investors and the financial markets. It created uncertainty and volatility, and although the Bank of England’s decisive action on 28 September was helpful, it will take time to see whether this restores greater stability in financial markets. 

This volatility has made it challenging for lenders to price fixed rate mortgages, leading to a considerable number being taken off sale. However, the mortgages market has remained open and we are now seeing more products coming back to market. The rates are however much higher and homeowners will need to factor in more expensive mortgage costs alongside the increases in other household expenditure. There could well be some downward pressure on house prices as interest rates and affordability challenges force those thinking about buying or selling to pull back and wait.

The housing market is not, however, just ‘one market’ and the impacts will be felt differently depending on different circumstances, whether they are regional or personal.  We saw during UK Savings Week the importance of individuals building a pot of savings to provide some financial resilience when storms such as these come along. Research for the campaign showed that over a third of people are now relying on their savings to get by, although worryingly, one in seven don’t have a savings safety net to fall back on.

From a building society perspective, it’s a myth to think that the impact of the current instability in the financial markets will necessarily be felt harder and longer for smaller lenders. Of course all lenders are impacted and the impact will be different for each organisation, but the building society sector funds around 80% of its mortgage lending from retail savings, and they remain committed to helping individuals and families to buy their own home. 

While the causes of the current market volatility are different to the financial crisis in 2007/8, it is worth remembering that the building society sector continued to provide mortgages when many of the banks had stopped. The benefits of diversity in financial services become apparent in any crisis and this is unlikely to be any different.

Looking forward, what we now need is a clear partnership between the Government and the Bank of England to calm the markets; coupled with a joined up and sustainable housing supply plan from the Government.  Single initiatives, launched in isolation simply cannot do the job, and as we have seen can lead to many unintended and unwelcome consequences.