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Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

UK property price optimism among private rental sector landlords and residential property owners has dropped to the lowest recorded level for 18 months after buy to let mortgage lending in January was reported to be decidedly sluggish.

Traditionally, the UK property market generally experiences a slow start that incrementally builds to a summer buying frenzy before reaching another plateau and then a further period of increase followed by a gradual easing at the end of the year.

The latest Halifax House Price Index (HPI) found that UK property prices increased by just 2% in January 2015, reaching a new UK average property price of £193,130 (GBP).

Combined with figures released by the Department of Communities and Local Government, showing a slowdown in the number of new homes being built, and it is clear why landlord and residential property owners optimism has fallen.

60% of landlords and property owners, surveyed for the lender’s latest housing market confidence tracker report, expected the average property price to be significantly higher in 12 month’s time.

This means that house price optimism has fallen by 10 points from 62 to +52, the lowest level of consumer confidence since June 2013, when 52% of private rental sector landlords and residential property owners expected a large rise in property prices.

So what’s different?

  • In June 2013 UK inflation was at 2.9% compared to the current 0.3%
  • Employment was just over 30 Million compared to today’s figure of 30.9 Million
  • Mortgage lending levels were at £15 Billion (GBP) compared to the current £17 Billion (GBP).

Despite the fact that the UK’s Gross Domestic Product (GDP) for 2014 increased by 2.6% and all members of the Bank of England’s (BoE) Monetary Policy Committee (MPC) voted to hold interest rates at 0.5%, the dip in confidence levels over UK property prices reflects public concern over the UK economy in general.

Craig McKinlay, mortgages director at the Halifax said that “More than half of consumers still believe UK property prices will be higher than they are now in a year’s time; however optimism has continued to weaken. Despite this we’re now seeing a return to the seasonal trend for house price activity”.

But he pointed out that of more concern are the figures from the Department of Communities and Local Government showing a slowdown in the number of new homes being built. ‘It’s widely acknowledged that the UK needs an increase in the amount of new housing being built,’ said McKinlay.

‘The Lloyds Banking Group Commission on Housing targeted 2 to 2.5 million new homes built by 2025 new homes to be built before 2025. If we are to address demand the increase in new homes coming onto the market needs to be sustainable,’ he explained.

Council of Mortgage Lenders Give Reasons For Optimism In 2013

CML Give Reasons To Stay Positive About UK Property Market In 2013

CML Give Reasons To Stay Positive About UK Property Market In 2013

The UK Council of Mortgage Lenders (CML) are more positive about the UK housing market and the wider economy than they were a year ago, despite economic headwinds and downside risks.

A key reason is that mortgage lenders currently face few funding pressures, in part reflecting the governments funding for lending scheme.

Property purchasing activity was more robust than expected in the last quarter of 2012, on the back of better mortgage availability and more realistic property pricing, and the CML expect this to continue over the coming months.

2013 started on a more positive note than a year ago, even though the UK economy has barely grown.

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Bank of England Base Rate To Remain AT 0.5%

Bank of England Base Rate To Remain AT 0.5%

The Bank of England’s (BoE) Monetary Policy Committee (MPC) again voted to maintain the bank base rate at 0.5% last week.

The MPC have agreed to keep the bank rate at 0.5% for the foreseeable future.

The bank rate has stayed at 0.5% since 5 March 2009, a long-term low of over three and a half years. This means that interest rates on savings are low, but that in some instances mortgage payments have become lower and more affordable.

The Monetary Policy Committee also voted to continue with its programme of asset purchases totalling £375 Billion (GBP), financed by the issuance of central bank reserves.

According to the Bank of England, the Committee expects the announced programme of asset purchases to take another month to complete, and that the scale of the programme will be kept under review.

The last previous change in the size of the Asset Purchase programme was an increase of £50 Billion (GBP) to £375 Billion (GBP) on 5 July 2012.


For newer investors…..


What is the MPC?

MPC stands for Monetary Policy Committee. There are 9 members on the committee; the Bank of England governor, the two Deputy Governors, the Bank’s Chief economist, the Executive Director for Markets and four external members appointed by the Chancellor. Each member has an expertise in the field of economics and monetary policy and they meet once a month to set the interest rate.

What is the base rate?

The base rate is the interest rate set by the Bank of England for lending to other banks. This is determined at the Monetary Policy Committee monthly meeting.

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Minutes from the last Monetary Policy Committee meeting show The Bank of England has sharply downgraded its growth forecast for the rest of the year, cutting their rate to close to zero, after having expected much stronger growth as recently as August.

The Minutes, released last Wednesday, show that the MPC voted unanimously to increase its quantitative easing programme by £75 billion, although discussed the possibility of raising it to £100 billion.

In its last quarterly report in August, the Bank estimated a 0.4% quarter on quarter growth for the last 3 months of the year and an annual 2.1% compared to the last quarter of 2010.

Independent analysts are beginning to downgrade forecasts for 2011 to below 1%. After the Minutes were released, the LibDem Business Secretary, Vince Cable, refused to rule out the possibility that there could be a double-dip recession.

In an outspoken interview, he admitted the “brutal reality” was that Britain’s economy is deteriorating.

During the week independent think-tank, the Centre for Economic and Business research, (CEBR), revised down its growth forecast for next year to 0.7%, below the Office of Budget Responsibility’s forecast of 2.5% and also revised down its growth forecast for this year to 0.6% from a range of 1% to 1.5%.

The Governor of The Bank of England, Sir Mervyn King has defended the UK Central Bank’s decision to revive its stimulus programme after official figures showed inflation rampaging ahead.

Speaking to an audience of company directors in Liverpool Mr King said that the pick up in the annual inflation rate to 5.2% in the 12 months to September 2011 was in line with expectations.

According to the Bank’s Monetary Policy Committee, inflation will soon start to fall. At the same meeting, Sir Mervyn King issued another prognosis, not only on the UK but on the global economy.

He stated that Britain is at risk from a fundamental crisis in the world economy and “time is running out” to solve it.

Despite record low interest rates, printing new money for quantative easing and other emergency measures, Governments have not yet addressed the underlying problem of overspending that was the cause of the financial crisis.

Governor of the Bank of England, Sir Mervyn King, has said “Britain could be in the grip of the most serious financial crisis ever and that the global and UK economies have been turned on their heads in the past three months.

Speaking last Thursday evening Bank of England chief stated that the world had changed, and the situation could be even worse than the great Depression of the 1930s.

He argued that it was critical to do the right thing, which in the UK meant the creation of more money.

Sir Mervyn was speaking after the Bank’s Monetary Policy Committee kept rates on hold for the 32nd month in a row at the historic low of 0.5% with investors now believing that rates will not rise until early 2013 at the very earliest.

Since nominal interest rates are already as low as they can realistically go and the Government has ruled out easing back on deficit reduction more QE is really the only thing left as the world slides, towards a very sharp slowdown.

Sir Mervyn dismissed fears that printing more money would trigger dangerous levels of inflation and said Britain’s problem was too little money in the economy, not too much.

Bank Of England Keep Interest Rates at 0.5% For 28th Month in a row

Bank of England Set 28 Month Record

The Bank of England (BoE) are to keep interest rates on hold this Thursday for an amazing 28th month in a row amid further signs that the UK’s economic recovery is faltering.

When the Bank’s Monetary Policy Committee (MPC) met a month ago, it left interest rates at their record low of 0.5% because of worries about the fragile nature of the economy.

Since then, there have been further signs of a slowdown in growth, after surveys revealed that activity in the manufacturing sector in June slumped to a 21 month low and consumer confidence showed its biggest fall since January.

Many economists now do not expect a rise in rates until 2012 despite inflation having remained at 4.5% in May, double the BoE’s 2% target.

One of the main worries for the MPC is the decline in consumer spending, as nervous households delay all but essential purchases because they fear for their jobs, while their wages are failing to keep pace with rising prices.

Even with the revelations that recent economic data had been weak, there was renewed talk among the MPC members about the economy needing to be boosted by a second round of quantitative easing.

Howard Archer, chief economist at IHS Global Insight, said: ‘We now expect the Bank to hold off from raising interest rates until the second quarter of 2012. We suspect that most MPC members will maintain the view for many more months to come that higher interest rates are an extra handicap that the fragile UK economy could do without.”

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