Mortgage and Interest Rates News in the UK
At Riversdale Commercial Finance we like to pride ourselves on being kept informed of the latest industry news effecting our services. We will occasionally share news of interest with you on this page.
8th May 2008 - Bank of England Maintains Bank Rate at 5.0%
The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 5.0%.
The Committee's latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 14 May.
The minutes of the meeting will be published at 9.30am on Wednesday 21 May.
Source: The Bank of England
10th April 2008 - Bank of England Reduces Bank Rate by 0.25 Percentage Points to 5.0%
The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.0%.
CPI inflation rose to 2.5% in February. The Committee expects inflation to rise further this year, reflecting the continuing impact of higher energy and food prices, as well as the recent depreciation of sterling on import costs. Such pressures are already evident in producer input costs and pricing intentions.
Even if commodity prices remain at their current high levels, inflation should fall back. But to ensure that inflation meets the 2% target in the medium term, the Committee needs to balance two risks. On the upside, above-target inflation this year could raise inflation expectations so that, in the absence of some margin of spare capacity, inflation would remain above the target. On the downside, the disruption in financial markets could lead to a slowdown in the economy that was sufficiently sharp to pull inflation below the target.
In the Committee’s judgement, the balance of these risks to the inflation outlook in the medium term justifies a cut in Bank Rate this month. Credit conditions have tightened and the availability of credit appears to be worsening. While the recent depreciation in sterling will support net exports, the prospects for output growth abroad have deteriorated. In the United Kingdom, business surveys suggest that growth has begun to moderate and that a margin of spare capacity will emerge during this year. This should help to keep domestic inflationary pressures in check in the medium term.
Against that background, the Committee judged that a reduction in Bank Rate of 0.25 percentage points to 5.0% was necessary to meet the 2% target for CPI inflation in the medium term.
The minutes of the meeting will be published at 9.30am on Wednesday 23 April.
Source: The Bank of England
6th March 2008 - Bank of England Maintains Bank Rate at 5.25%
The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 5.25%.
The minutes of the meeting will be published at 9.30am on Wednesday 19 March.
Source: The Bank of England
7th February 2008 - Bank of England Reduces Bank Rate by 0.25 Percentage Points to 5.25%
The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.
The prospects for output growth abroad have deteriorated and the disruption to global financial markets has continued. In the United Kingdom, credit conditions for households and businesses are tightening. Consumer spending growth appears to have eased. Although the substantial fall in the sterling exchange rate is likely to promote re-balancing of total demand, output growth has moderated to around its historical average rate and business surveys suggest that further slowing is in prospect. These developments pose downside risks to the outlook for inflation.
CPI inflation, at 2.1% in December, was close to the 2% target, but higher energy and food prices are expected to raise inflation, possibly quite sharply, in the coming months. And the lower level of sterling will boost import costs. The impact on inflation should begin to fade later in the year, but measures of inflation expectations are currently elevated. These developments pose upside risks to the outlook for inflation further ahead.
Given this outlook for inflation, some slowing of demand growth, by reducing the pressure on capacity, is likely to be necessary to return inflation to target in the medium term. The Committee needs to balance the risk that a sharp slowing in activity pulls inflation below the target in the medium term against the risk that elevated inflation expectations keep inflation above target.
Against that background, the Committee judged that a reduction in Bank Rate of 0.25 percentage points to 5.25% was necessary to meet the 2% target for CPI inflation in the medium term.
The Committee’s latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 13 February.
Source: The Bank of England
6th January 2008 - Bank of England Maintains Bank Rate at 5.5%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 5.5%.
Source: The Bank of England
6th December 2007 - Bank of England Reduces Bank Rate by 0.25 Percentage Points to 5.5%
The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.
Although output in the United Kingdom has expanded at a brisk pace for the past two years, there are now signs that growth has begun to slow. Forward-looking surveys of households and businesses suggest spending is moderating, broadly in line with the projections contained in the November Inflation Report. But conditions in financial markets have deteriorated and a tightening in the supply of credit to households and businesses is in train, posing downside risks to the outlook for both output and inflation further ahead.
CPI inflation was 2.1% in October. Higher energy and food prices are expected to keep inflation above the target in the short term. Although upside risks to inflation remain, which the Committee will continue to monitor carefully, slowing demand growth should ease the pressures on supply capacity, bringing inflation back to target in the medium term.
Against that background, the Committee judged that a decrease in Bank Rate of 0.25 percentage points to 5.5% was necessary to meet the 2% target for CPI inflation in the medium term.
The previous change in Bank Rate was an increase of 0.25 percentage points to 5.75% on 5 July 2007.
Source: The Bank of England
9th November 2007 - BASE RATE UNCHANGED AT 5.75%
Peter Charles, chief economist at Mortgage Express, says:
Money markets and economic analysts are all agreed that the next move in base rate will be a cut but, clearly, the MPC does not want to move too early. Many of the economic data over the past month have confirmed that, away from capital markets and the housing and mortgage sectors, the UK economy has remained remarkably robust, with GDP growth in Q3 having remained at 3.3% pa. Given its focus on the control of inflation, the MPC is not likely to cut base rate until there are clear signs that the economy is slowing. Unless Christmas spending is woefully weak, there is little prospect of rates falling until February.
6th September 2007 - BASE RATE UNCHANGED AT 5.75%
Peter Charles, chief economist at Mortgage Express, says:
With all the current uncertainty in the money markets, the one thing that did appear certain was that the MPC would leave base rate
unchanged this month. And so it has proved. As expected, the MPC did not want to add to the markets' jitters. But this does not mean that
base rate has, necessarily, reached its peak. The August Inflation Report pointed to a further 25bp rise, reflecting the MPC's continuing
concerns about the prospects for inflation in the medium term. Latest data showing that the economy remains relatively strong will have done
nothing to ease the MPC's concerns.
2nd August 2007 - BASE RATE UNCHANGED AT 5.75%
Peter Charles, chief economist at Mortgage Express, says:
After last month’s rise, a further increase in base rate this month would have had suggested that the Monetary Policy Committee had lost
control. And there was little chance that the MPC would reverse last month’s rise, as that would suggest that the Committee members had
no idea what they were doing. With the MPC divided about the need to raise base rate last month, future prospects for rates are uncertain.
Although the money markets now appear convinced that 6.00% will represent the peak of the current interest rate cycle, how long base rate
might stay at such a high level is not at all clear.
2nd August 2007 - Bank of England Maintains Bank Rate at 5.75%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at
5.75%.
The Committee’s latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 8 August. The
minutes of the meeting will be published at 9.30am on Wednesday 15 August. The previous change in Bank Rate was an increase of 0.25
percentage points to 5.75% on 5 July 2007.
Source: The Bank of England
5th July 2007 - Bank of England Raises Bank Rate by 0.25 Percentage Points to 5.75%
The Bank of England’s Monetary Policy Committee today voted to raise the official Bank Rate paid on commercial bank reserves by 0.25
percentage points to 5.75%.
In the United Kingdom, output growth has remained firm and appears to be evolving in line with the Committee’s most recent projections.
Credit and broad money continue to grow rapidly. The pace of expansion of the world economy remains robust.
CPI inflation fell back to 2.5% in May. Lower gas and electricity prices mean that CPI inflation is likely to continue to fall back to around the
2% target in the course of this year. Although pay pressures remain muted, the margin of spare capacity in businesses appears limited and
most indicators of pricing pressure remain elevated.
The Committee judged that, relative to the 2% target, the balance of risks to the outlook for inflation in the medium term continued to lie to the
upside. Against that background, it further judged that an increase in Bank Rate of 0.25 percentage points to 5.75% was necessary to meet
the 2% target for CPI inflation in the medium term.
The minutes of the meeting will be published at 9.30am on Wednesday 18 July. The previous change in Bank Rate was an increase of 0.25
percentage points to 5.5% on 10 May 2007.
Source: The Bank of England
7th June 2007 - Bank of England Maintains Bank Rate at 5.50%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at
5.5%.
The minutes of the meeting will be published at 9.30am on Wednesday 20 June. The previous change in Bank Rate was an increase of 0.25
percentage points to 5.5% on 10 May 2007.
Source: The Bank of England
10th May 2007 - BASE RATE RAISED TO 5.50%
Peter Charles, chief economist at Mortgage Express, says:
The MPC has built a reputation for not surprising the markets and
the increase in base rate this month is entirely in line with
expectations. Indeed, if there is a surprise, it is that the rate
wasn't raised in March or April, as the February Inflation Report
had given a clear signal that a rate of 5.50% would be required to
ensure that price inflation fell back to its target rate. Analysts
will be eagerly awaiting the publication of the May Inflation Report
next week to see whether the Bank now considers that a further rise
in rate is needed to bring inflation under control.
10th May 2007 - Bank of England Raises Bank Rate by 0.25 Percentage Points to 5.5%
The Bank of England’s Monetary Policy Committee today voted to raise the official
Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.5%.
In the United Kingdom, output growth has remained firm. Business investment has
been stronger than expected and, although indicators of consumer spending have
been volatile, the underlying picture is one of steady growth. Credit and broad
money continue to grow rapidly. The pace of expansion of the international economy
remains robust.
CPI inflation picked up to 3.1% in March. Lower gas and electricity prices and
weaker import price inflation mean that CPI inflation is likely to fall back
to around the 2% target in the course of this year. But the margin of spare capacity
in firms appears limited and there are signs that businesses are more able to push
through price increases. Relative to the 2% target, the risks to the outlook for
inflation in the medium term consequently remain tilted to the upside.
Against that background, the Committee judged that a further increase in Bank
Rate of 0.25 percentage points to 5.5% was necessary to meet the 2% target for
CPI inflation in the medium term.
The Committee’s latest inflation and output projections will appear in the Inflation
Report to be published on Wednesday 16 May.
The minutes of the meeting will be published at 9.30am on Wednesday 23 May.
The previous change in Bank Rate was an increase of 0.25 percentage points to
5.25% on 11 January 2007.
Source: The Bank of England
5th April 2007 - BASE RATE UNCHANGED AT 5.25%
Peter Charles, chief economist at Mortgage Express, says:
In March, the MPC held off from raising base rate because of the volatility
in financial markets and the risk that a rate rise “could provide an unwelcome
addition to (this) uncertainty and volatility”. It will be interesting to see
the Minutes of the April meeting to find out why the widely touted rate increase
did not happen this month. Most likely, the Committee wanted to wait one more
month to align with the publication of the quarterly Inflation Report. But
there is a possibility that signs of weakening demand are causing the MPC to
reconsider the need for a rate rise.
5th April 2007 - News Release Bank of England Maintains Interest Rates at 5.25%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 5.25%.
The minutes of the meeting will be published at 9.30am on Wednesday 18 April.
Source: The Bank of England
8th March 2007 - BASE RATE UNCHANGED AT 5.25%
Peter Charles, chief economist at Mortgage Express, says:
The MPC voted to leave base rate unchanged, but this is unlikely to signal any new-found unanimity within the Committee. The Minutes of last month’s meeting showed that two members had voted for a further increase in base rate and it is unlikely that they changed their view in the past month. Nothing that has happened in the past four weeks will have eased their concerns that the strength of demand and the risk that the high level of price inflation will pass through into wages. The uncertainty about the MPC’s next decision will continue for some months yet and a further rise in base rate still looks likely.
Source: The Bank of England
8th March 2007 - News Release Bank of England Maintains Interest Rates at 5.25%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 5.25%.
The minutes of the meeting will be published at 9.30am on Wednesday 21 March.
The previous change in Bank Rate was an increase of 0.25 percentage points to 5.25% on 11 January 2007
Source: The Bank of England
5th March 2007 - BTL to grow 40% in 10 years
An increase in the traditional rental market could see the buy-to-let sector growing by more than 40% by 2016, claims Alliance & Leicester Mortgages.
In its ‘Changing UK Household Market’ report, published in conjunction with the Centre for Future Studies, the firm says a positive attitude towards renting and a desire for flexibility and mobility has sparked a surge in the buy-to-let market.
The company claims over the next 10 years the buy-to-let sector will see a 41% rise in growth as three main drivers start to affect the market:
>>> A rise in the traditional rental market, especially among students and single people;
>>> Younger generations will prefer to rent as it becomes more socially accepted not to own a home;
>>> And there will be an increased use of rented property as people seek flexibility and mobility.
As a result, the research says the buy-to-let market, fuelled by the growth in private rental, will play a pivotal role in the future of the UK housing market while current trends will also continue to contribute to the success of the market including an increase in the number of ‘professional’ landlords.
This group, consisting of those with rental income equivalent to the national average wage, now accounts for 21% of all landlords, with ‘professionals’ tending to be younger than their ‘non-professional’ counterparts, while also owning a portfolio worth at least £1m or who have been landlords for at least two years and own between six to 20 properties.
However, Alliance & Leicester points out on average both ‘professional’ and ‘non-professional’ landlords currently own four buy-to-let properties worth nearly £500,000, although around half own five or fewer properties, and around 2% own more than 50 properties.
A&L also says more than one in 10 of all landlords say their main job and main source of income comes from letting property, while an a further 20% say being a landlord is a part-time job which provides them with a substantial part of their income.
Stephen Leonard, director of mortgages at Alliance & Leicester, says demand for rented property has been growing steadily in recent years, and this growth is expected to continue as the number of renters rises and buy-to-let becomes more attractive to both existing and potential landlords.
He adds: “The prediction of further rate rises this year has fuelled debate on a cooling in the buy-to-let market with rental yields decreasing. However, with increasing numbers of professional landlords, and the majority expecting to stay in the market for more than ten years, buy-to-let is likely to remain an important part of the overall housing market.”
Source: IFA Online By Nyree Stewart
3rd March 2007 - 281% rise in stamp duty-hit properties
Over the past five years there has been a 281% rise in the number of home sales in England and Wales above the £250,000 stamp duty threshold, Halifax says.
The number of residential property sales attracting at least 3% stamp duty has increased from 73,403 in 2001 to 279,408 in 2006.
Home buyers in these transactions were faced with a stamp duty bill of at least £7,500. In 2006, 19% of home buyers paid at least 3% stamp duty compared with 6% in 2001.
Total stamp duty revenue from residential property sales was £4.6 billion in 2005/06, up 114% from the £2.1 billion raised in 2000/01.
89% of the rise in the residential stamp duty take over the five years was due to an increase in the amount raised at the higher stamp duty bands (3% on sales between £250,000 and £500,000 and 4% above £500,000).
Stamp duty revenue raised from sales of properties valued at more than £250,000 rose by 175% from £1.2 billion in 2000/01 to £3.4 billion in 2005/06.
The higher stamp duty bands accounted for 74% of total residential stamp duty revenue in 2005/06 compared with 58% in 2000/01.
Halifax estimates that 3.5 million (19%) English and Welsh properties are now valued above the £250,000 stamp duty threshold; and 600,000 (3%) are valued above the £500,000 threshold.
London and the South East account for 64% of homes valued above £250,000 and 77% of homes valued above the £500,000 threshold.
Tim Crawford, group economist at Halifax, said: "Bracket creep has been a key factor as a growing percentage of property sales now occur above the higher stamp duty thresholds of £250,000 and £500,000, which have not been changed since their introduction in 1997.
"Nearly a quarter of postcode districts in England and Wales now have an average price above the 3% stamp duty threshold of £250,000, compared to only one in 20 districts five years ago."
Source: Best Advice.net
8 February 2007 - News Release Bank of England Maintains Interest Rates at 5.25%
The Bank of England’s Monetary Policy Committee today voted to maintain the official
Bank Rate paid on commercial bank reserves at 5.25%. The Committee’s latest inflation
and output projections will appear in the Inflation Report to be published on Wednesday
14 February. The minutes of the meeting will be published at 9.30am on Wednesday 21 February.
The previous change in Bank Rate was an increase of 0.25 percentage points to 5.25%
on 11 January 2007.
Source: The Bank of England
18 January 2007 - Inflation and the Service Sector
In a speech to the Cardiff Breakfast Club today, Professor Timothy Besley,
a member of the Bank’s Monetary Policy Committee, considers the long-term
structural shift of the UK economy from manufacturing towards services and its
implications for growth and inflation.
Market services – which are services excluding government – grew from a
little less than 50% of gross value added in 1985 to more than 60% in 2004.
Most of this was a relocation of economic activity from manufacturing to
services.
Professor Besley says “…market services are a heterogeneous group
of economic activities including goods produced and consumed as
services (such as restaurants), those that facilitate the production
and consumption of other goods (such as retailing) and those that are
inputs into other kinds of production (like financial services). ...
Business and financial services are an important intermediate input into
other economic activities in the United Kingdom and are not just consumed
directly.”
He points out that “In recent years, we have seen all kinds of businesses
outsourcing processes to achieve lower costs and to take advantage of gains
from specialisation. Some of this is outsourcing of low value-added
activities, in part to low-wage economies. But the growth of business
services in the United Kingdom reflects in part outsourcing of high
value-added activities, which are high up the production ladder allowing
firms to take advantage of the specialised skills available in business
services. The latter, in particular, can be a source of productivity
improvements. Business services are also often used directly in the
outsourcing process.”
“The structural shift from manufacturing towards services is consistent
with increasing prosperity and growth for the UK economy. What matters
is not whether the output is in the form of services or manufacturing –
it is the move towards the production of higher value-added activities
that enables the UK economy to progress. One of the key challenges is
to maintain the skill base and to develop the right kind of business
environment to permit continual movements of production up the value chain.
The stability created by sound monetary policy plays a key role in
delivering a favourable environment for business.”
Professor Besley then comments on the implications of this trend for
inflation, saying “We have observed a tendency for consumer services
price inflation to run ahead of consumer goods price inflation over the
past ten years. This does not imply an inflationary bias in the structural
change from the production of services to goods. Changes in CPI depend
on the balance of demand and supply factors in the economy as a whole.
However, the current strength of the service sector, as evidenced in the
survey data to which I have referred, is germane to judgements about the
current strength of the UK economy.”
He concludes, “I am not trying to downplay the important role played by
manufacturing in the United Kingdom. But the general context is one in
which prosperity is maintained in both services and manufacturing by
improving the skills base and business climate to support movements towards
higher value-added economic activities.”
Speech by Timothy Besley Inflation and the Service Sector Download PDF (142k)
16 January 2007 - Inflation and the Supply Side of the UK Economy
To view the speech by Andrew Sentance, please follow the link below.
Inflation and the Supply Side of the UK Economy - PDF file
Speech by Andrew Sentance at Bloomberg City Gate House on 16 January 2007
11 January 2007 - Bank of England Raises Bank Rate by 0.25 Percentage Points to 5.25%
The Bank of England's Monetary Policy Committee today voted to raise the
official Bank Rate paid on commercial bank reserves by 0.25 percentage points
to 5.25%.
In the United Kingdom, output continues to rise at a firm pace. Domestic
demand has grown steadily and credit and broad money growth remain rapid.
The international economy continues to grow strongly.
Sterling has risen and oil prices have fallen back. But the margin of spare
capacity in the economy appears limited, adding to domestic pricing pressures.
CPI inflation was 2.7% in November. It is likely that inflation will rise
further above the target in the near term, but then fall back as energy and
import price inflation abate. Relative to the November Inflation Report, the
risks to inflation now appear more to the upside.
Against that background, the Committee judged that an increase in Bank Rate
of 0.25 percentage points to 5.25% was necessary to bring CPI inflation back
to the target in the medium term.
The previous change in Bank Rate was an increase of 0.25 percentage points to
5.0% on 9 November 2006.
11 December 2006 - London house prices up 1.5%
Latest data from haart estate agents reveals the average London house price has increased by 1.5% to £256,681 in November - up from £252,952 in October.
Housing market activity in London has remained unusually strong throughout November, with transaction levels up by 10% compared with last November, as buyers look to move before Christmas.
The consistently high percentage of buyers continuing to enter the market looks set to reduce the effect of the traditional ‘quiet seasons’.
High demand and a continuing shortage of stock in November have pushed prices up to £256,681, the highest level for over a year, but buyers remain price sensitive and overpriced houses are not selling.
Paul Smith, chief executive of haart, said: “Despite the interest rate rise at the beginning of the month, there hasn’t been a drop in buyers’ appetite to enter the market and as the festive season approaches, we look set to see an increasingly ‘seasonless’ market.
"Traditionally, the summer months and the Christmas period brought calmer phases with fewer people prioritising house hunting, but if the high activity continues, these ‘seasons’ within the market could start to become less noticeable.
"City workers anticipating the arrival of their Christmas bonuses have already boosted activity levels in the capital. The number of potential buyers registered at our branches, particularly in the prestigious areas of London, has jumped considerably already.
"Millions of pounds are expected to be channelled into bricks and mortar in the New Year. However, while these city workers may be prepared to pay above the odds for their dream home, most buyers remain price sensitive and overpriced properties will not sell.”
The level of first time buyers in the market remained at 26% in November.
Smith commented: “The Bank of England’s decision to raise the base rate to 5% in November will impact most on first-time buyers. However, there has been no decrease in the level of first-time buyers entering the market and this is a promising sign. Although this sector remains wary, the majority are still confident in their own financial security under a backdrop of economic growth."
Source: BestAdvice.net
6th December 2006: 09:55 Bank charges to soar under OFT crackdown – papers 6 Nov By Emily Perryman
Banks have begun a desperate attempt to replace billions of pounds of revenue they expect to lose next year under a regulatory crackdown, according to the Independent.
Consumer groups warned yesterday almost all leading banks have started to increase overdraft rates and other charges before new rules come in which could cost them more than £3bn a year.
The warnings followed the decision yesterday by Lloyds TSB to raise its overdraft interest rates for the second time in three months, says the paper.
The crisis has been caused by a ruling in May from the Office of Fair Trading (OFT), which said credit card companies charging borrowers more than £12 for paying bills late or exceeding borrowing limits were breaking the law.
It has since announced an identical investigation into fees charged by the banking sector – the review is expected to conclude next year with a similar crackdown.
THE CHIEF executive of HSBC has called on the government to rethink bankruptcy legislation as he warned the bank continues to see high levels of consumer debt, says the Daily Telegraph.
Mike Geoghegan hinted he believes recent legislation, namely the 2004 Enterprise Act, has allowed rules on bankruptcies and individual voluntary arrangements (IVAs) to be relaxed.
He admitted the growth in both bankruptcies and IVAs has led the bank to adopt a "more restricted credit appetite", which has led to a slowdown in the growth in unsecured lending and lower sales from credit-related insurance as a knock-on effect.
ROYAL BANK of Scotland said this morning it expects to top City forecasts for the full year with record profits of more than £9bn, reports the Guardian.
"RBS is performing well and our results for 2006 are expected to be slightly ahead of market consensus forecasts," the group said. The consensus forecast is for £9.2bn, up from £8.25bn in 2005.
RBS said growth in bad debts "continues to moderate" and bad debts now represent a "slightly lower" proportion of total loans and advances.
15th November 2006: 15:00 - FSA raises concerns over higher income multiples - By Emily Perryman
The Financial Services Authority has raised concerns the move to higher income multiples on mortgages and a possible change in economic circumstances could result in more consumers falling into debt.
Speaking at the Mortgage Business Expo today, Clive Briault, managing director of retail markets at the FSA, says the regulator is "particularly concerned" about what its quality of advice processes work tells it about the approach to affordability in mortgage firms.
He states: "It is becoming clear that affordability is not being adequately discussed and assessed in an unacceptable number of firms. Indeed, in a worrying number of cases, affordability is not being discussed with customers at all."
He says both advisers and lenders have responsibilities to ensure mortgages are affordable and neither party can delegate responsibility to the other.
In another speech at the British Bankers’ Association’s (BBA) annual conference yesterday, Briault said the move towards higher income multiples on mortgages is prompting the regulator to ask whether lenders are appropriately stress-testing lending at such levels.
He raises concerns such lending may not be appropriately controlled to ensure lenders meet the affordability and other responsible lending requirements imposed by the FSA.
Briault points out the level of unsecured debt is extremely high and a small change in economic circumstances could result in a large increase in the number of consumers failing to meet their obligations.
He states: “Even if this is not in itself a significant threat to banks’ capital, it is a potential reputational risk to the industry.”
The FSA carried out work earlier this year which showed banks could make better use of their management information to proactively identify individuals who are starting to struggle.
In addition, it issued a letter to bank chief executives summarising current industry practice on stress-testing and saying the industry still has “some way to go”.
The FSA has produced online debt tests which it hopes will increase consumer awareness of the risks of over-extending themselves.
9th November 2006: 15:55 - Analysts predict interest rate cuts for '07 - By Investment Week
Analysts are predicting interest rate cuts for 2007, despite today’s MPC decision to raise the official bank rate by 0.25 percentage points to 5%.
The MPC increased the rate after deciding a rise was needed to bring CPI inflation back to target in the medium term.
David Millar, head of bond strategy at Scottish Widows Investment Partnership (Swip), says, while markets have already factored in the rate rise, next week's inflation report is of more interest.
The report will provide a clearer indication of direction for UK interest rates, he says. Based on Swips’ growth forecast, Millar predicts no further rates rise and a return towards 4.75% by mid 2007.
Paul Niven, head of asset allocation at F&C Investments, expects market reaction to the rise to be muted.
Many people expect another hike in the first half of 2007 due to MPC concern over inflationary pressures feeding through to wage inflation, he says.
However, another rise in 2007 is fully discounted by the market and Niven predicts interest rates could be cut in the second half of 2007 as global cyclical momentum fades.
9 November 2006 13:00 - BASE RATE RAISED TO 5.00%
Peter Charles, chief economist at Mortgage Express, says:
The rise in base rate this month can hardly be counted as a surprise. Although Mervyn King may have tried to persuade the House of Lords Select Committee that interest rate changes are never a done deal, virtually everyone else involved in economic analysis or money markets believed a rise in rate this month was inevitable.
Money markets are convinced that a further rise in rate will be imposed early in the New Year. But many analysts consider that this will be unnecessary, believing that inflationary pressures within the economy are not as marked as the current rate of price inflation (2.4%) would suggest.
29 October 2006 - House prices to income ratio shoots up 60%
The ratio of house prices to income has risen by 60% since 1970, Alliance Trust Research Centre says.
Alliance Trust said that the ratio has worsened most in London, East Anglia and the South West, where it increased by 66%, 65% and 63% respectively.
London is the least affordable region for today’s first-time buyers. House prices there are now 4.4 times income, against 2.6 times in 1970.
The South East, where the ratio has climbed to 4.3 times income from 2.7 times 35 years ago, is the second least-affordable region.
The lowest ratio of house prices to income is in Scotland where prices have increased to 3.2 times income, up from 2.4 times in 1970, followed by the North of England at 3.3 times today, from 2.3 times in 1970, and Yorkshire at 3.4 times against 2.1 times in 1970.
Not affordable
Between 1970 and 2005, the gap between the most affordable region for first-time buyers in the UK and the least has widened to 38%, from 29%.
In 1970, the South East was the least affordable and Yorkshire was the most affordable but that ranking has changed. London has become the worst region for first-time buyers on a price-to-income basis, and Scotland, the best.
The region where house prices rose most over the 35-year period was London, where they climbed 3,432% followed by the South West, up 3,427%. They rose least in Scotland, where they were up 1,906%. The average income of a first-time buyer has increased from an average £1,766 in 1970 to £35,937 last year.
Shona Dobbie, head of the Alliance Trust Research Centre, said: “In recent years, buy-to-let investors have taken on the traditional role of first-time buyers in keeping the market going, but you really need first-time buyers to sustain prices over the longer term. Our research shows how much pressure these new buyers are now under.”
28 September 2006 - News Release
House prices in UK continue to climb
House prices in UK continued to climb despite the increase in the interest rates by the Bank of England last month. House prices in September showed an increase of 1.3 percent, according to the latest survey by the Nationwide Building Society.
The average price of a house in the UK is billed at £169,413, over £13,000 more than the price during the same time last year. This month's "unseasonably strong" performance has lifted the annual rate of growth to 8.2 percent, making it the fastest annual growth rate since February 2005. The three-month graph saw house prices increase by 2.2 percent to the months leading to September.
"Just like the weather, the housing market was unseasonably warm in September, as August's interest rate hike [to 4.75%] did nothing to cool the rate of house price inflation. Buyer interest remains robust as estate agents continue to report strong enquiries", said Fionnuala Earley, a group economist for Nationwide. Ms. Earley added that the reason for the sudden surge in property prices could be attributed to fewer sellers willing to put their properties on the market.
Howard Archer of Global Insight concurred saying, "House prices may well see further marked increases in the near term, given the current level of mortgage activity; survey evidence showing strong buyer interest; strong demand from the buy-to-let sector; and a reported shortage of properties in some areas."
Source: HomesOnline.com
7 September 2006 - News Release
Bank of England Maintains Interest Rates at 4.75%
The Bank of England's Monetary Policy Committee today voted to maintain the official Bank rate paid on commercial bank reserves at 4.75%.
The minutes of the meeting will be published at 9.30am on Wednesday 20 September.
The previous change in interest rates was an increase of 0.25 percentage points to 4.75% on 3 August 2006.
Source: The Bank of England
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