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A series of reports is confirming what most of us already knew from experience – that the spending power of the UK consumer is being reduced.
According to figures from Asda, the discretionary spending power of the typical household has fallen £9 per week in the past year. Asda’s Income Tracker shows that the average family had £174 per week to spend in January, once they’d paid essential bills – compared with £183 per week in the same month in 2010.
Top property website Rightmove has seen a sharp increase in the take up of its services by estate agents in the last year. And that bodes well for recovery in the property market. The company saw pre-tax profits climb to £52.2 million, while more than 650 agents joined the site in 2010, leaving the total number of advertisers at over 18,000.
The roller coaster of speculation about interest rates has taken another dip, with the news that the UK economy shrank even faster than first thought in the last quarter.
Figures from the Office for National Statistics show that output fell 0.6% in the last three months of 2010. The severe weather is being blamed for the setback, but analysts note falls in household spending, and a slowdown in financial and business services dating back to October. So there is room for doubt about the strength of the recovery – even without the effects of the January VAT increase and expenditure cuts yet to be felt.
Another of the Bank of England’s nine rate-setters has shifted his opinion in favour of a rise in interest rates. Monetary Policy Committee minutes show that the Bank’s chief economist Spencer Dale joined with two other members of the MPC in voting for a rise at the February meeting.
Mr Dale called for a 0.25% rise in Bank rate, while Andrew Sentance, a longstanding advocate of a rate rise, urged a 0.5% increase. Significantly, the minutes show agreement among ‘most members’ that the ‘balance of risks to inflation in the medium term’ has moved upwards – suggesting that there is now a stronger case for action, as against expecting downward pressures such as public spending cuts to do the trick.
Deutsche Bank has been fined and told to pay compensation to customers for irresponsible lending practices. The Financial Services Authority (FSA) has levied the fine of £840,000 on DB Mortgages, which no longer provides new loans. The sum includes a 30% discount for cooperating with the investigation.
The lender will also pay out some £1.5 million pounds in compensation, under a programme aimed at up to 8,000 customers.
Mortgage finance is still hard to come by – but there are signs of a return to something like normality. That’s the message from latest figures issued by the Council of Mortgage lenders, which show that gross lending totalled an estimated £9.2 billion in January.
That represents a fall of 13% from the £10.6 billion lent in December. Compared with January last year, however, the figures show a rise of some 5%.
Speculation is mounting once again that interest rates are set to rise this spring. The pendulum has swung from ‘no change’ to ‘rates up’ and back again more than once recently. For now, the direction of travel seems to be favouring those who think that a rate rise is needed to bring down inflation.
One factor is a feeling that, after all the talk of double dip recessions, the economic news may be looking up. Hard to believe? Strong retail sales for January have been seized on by some, and it looks like figures showing that the economy shrank in the last quarter may be revised, though not by much. That’s enough to embolden those who say the risk of doing nothing –yet higher prices – outweighs the risk of doing something – raising rates, and putting a spoke in the recovery.
Property asking prices shot up in February – but question marks remain over the housing market. Latest figures from Rightmove show that prices increased by 3.1% in February, following the usual seasonal pattern after the traditionally slower winter months. Against the trend, the Midlands saw small falls in asking prices, but in Yorkshire and Humberside, the far North of England and East Anglia, prices raced ahead by between 5 and 7%.
Interest only mortgages are becoming a rarity, according to figures from the Council of Mortgage lenders. The CML reports a ‘clear shift’ away from interest-only deals, with just 6% of loans to first time buyers falling into that category in December 2010 – as against 30% or so in the years prior to 2007.
Back then, interest-only was seen as a good way of keeping payments to the minimum – often on what was intended to be a temporary basis. Last year, financial watchdog the FSA expressed concern that many borrowers had no strategy for paying back the capital loan at the end of their mortgage term. It was even thought such loans might be banned.
The number of mortgage deals open to borrowers with a small deposit is going up, according to latest research. Comparison site Moneyfacts reckons that there are now more than 200 deals on the market at 90% loan-to-value – which in other words require a minimum 10% deposit. Go back a year, and there were just over 140.
And there’s considerably more choice for those with 15% to put down – 560 deals, compared with 310 twelve months ago.
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