House Price Increase

According to the latest house price survey by the Halifax, the annual rate of growth increased from 2.1% in July to 2.6% in August with the average house price now £222,293, which is just above the previous high of December 2016 (£222,190).

The Lender highlights that recent figures for mortgage approvals suggest some buoyancy may be returning, possibly on the back of strong recent employment growth, with the unemployment rate falling to a 42 year low. However, wage growth is still lagging increases in consumer prices, which is likely to add pressure on household finances and increase affordability challenges for some buyers.

House prices should continue to be supported by low mortgage rates and a continuing shortage of properties for sale over the coming months. Sales of UK houses have now exceeded 100,000 for the seventh month in succession, and in the three months to July activity was 10% higher than in the same period last year. (Source: HMRC, seasonally-adjusted figures)

Mortgage approvals for house purchases – a leading indicator of completed house sales – also grew sharply, by 5.2% between June and July, to 68,700; the same level as in January. The increase in mortgage approvals nearly reversed all the falls seen so far this year, though they have remained in a narrow range between 65,100 and 68,700 per month over the past ten months. (Source: Bank of England, seasonally-adjusted figures)

No Time To Save

An estimated two million self-employed people in the UK are unable to save any money each month leaving them vulnerable to financial shocks, according to new research by insurer, LV=.

With the number of self-employed workers now close to five million, the second instalment of LV=’s ‘Income Roulette’ report – a study of debt, savings and protection among 9,000 people – explores how the self-employed would cope with an unexpected financial shock. The results show that four in ten (41%) self-employed people can’t afford to save any money each month and a further one in ten (11%) save less than £50. Furthermore, a third (33%) couldn’t survive for more than three months if they lost their income – meaning they fall short of the Money Advice Service’s recommended amount of savings that would allow them to be financially resilient.

When looking at barriers to saving, the figures show that monthly bills eat up the wages of nearly two thirds (62%) of self-employed people, compared to a national average of 56%, with this group also more likely to be hampered by debt (38% vs 32% national average). In addition to this, sole traders are more likely to be hit by unexpected costs such as home maintenance or car repairs (33% vs 28%).

As self-employed people don’t have the safety net of employers’ benefits, such as sick pay, they are often recommended to consider taking out some form of income protection to avoid having to rely on state support if they couldn’t work because of accident, sickness or disability. However, only 4% of self-employed people in LV=’s research have income protection, compared to a national average of 11%, with more than two fifths (42%) mistakenly believing that they’re not eligible for it.

Despite the lack of saving and insurance, the research shows this group is aware of the risks of self-employment – three in ten (28%) are worried about having an accident and not being able to work (vs the national average of 21%) and a similar proportion (29%) are worried about falling sick (vs 24%).

Scaled Back

Increases in payouts to victims of car crashes and operations are to be scaled back after discussions with insurance industry by the Ministry of Justice. In a U-turn by ministers, changes to the so-called “Ogden rate” used to calculate compensation payouts are to be revised, after insurers said they may inflate car insurance premiums by hundreds of pounds to compensate for the potential increase in claim costs.

When the government cut the rate from 2.5% to -0.75% in February there was an outcry from insurers. After a consultation, the Ministry of Justice has proposed a rate of between 0% and 1% in draft legislation. The change appears small, but the mathematical implications for payouts can be very significant. When the new Ogden rate was imposed in February, insurers said the compensation figure for a brain injury on a 25-year-old could soar from £3m to £8m, and that the NHS and other parts of the public sector could face an extra £6bn bill.

Responding to the news, Huw Evans, Director General of the ABI said “This is a welcome reform proposal to deliver a personal injury discount rate that is fairer for claimants, customers and taxpayers alike. The reforms would see the discount rate better reflect how claimants actually invest their compensation in reality and will provide a sound basis for setting the rate in the future. If implemented it will help relieve some of the cost pressures on motor and liability insurance in a way that can only benefit customers.”

Planning Down

One in seven older home owners planning to downsize in later life believe they will be unable to retire unless they move to a cheaper property, a survey has found. Nearly half (47 per cent) of over-55s who own their home are planning to sell up and move to a less expensive property in their later years, according to Prudential.

And while convenience was found to be the main reason for moving, a significant proportion of people are relying on downsizing as a key part of their retirement plans. One in seven (13 per cent) of those expecting to downsize said they could not afford to retire otherwise.

Prudential’s survey of more than 1,000 people suggests that home owners in Northern Ireland and the East of England are particularly likely to expect to downsize their property, while those living in London, Scotland and the West Midlands are the least likely to sell up and move somewhere smaller.

Those planning to move to a cheaper property expect to free up around £112,000 in equity on average by downsizing. One in nine (11 per cent) believe they will make more than £200,000 by downsizing. Of those who expect to raise money from downsizing, 60 per cent will use it to boost their retirement funds and improve their standard of living. Nearly half (47 per cent) will use the cash for travelling more, while (13 per cent) want to release equity to help their children buy a house and 14 per cent plan to simply give the cash to their children.

2 responses to “Weekly Round-up: 8th September 2017”

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KN Mortgage Management, KN Mortgages and knmortgages are trading styles of Keval Nagaria, who is an Appointed Representative of HL Partnership Limited, which is authorised and regulated by the Financial Conduct Authority. A fee maybe payable. The guidance and/or information contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.