2018, crash anniversaries and the housing market25 September 2018
Correctly, there are many topical references to the financial crash of 2008 that saw the beginning of a deep recession, with the collapse of Lehman Brothers in the US on 15 September 2008. With a decade now past, many might quite reasonably have forgotten this. Lessons have been learned by the global banks, systems have changed for the better, robust testing continues from the likes of the Bank of England. However, as we move into one of the two main house-moving seasons of the year (spring and autumn), timely reminders are worth reviewing. I never normally refer to films; however, The Big Short (be aware of adult language) is highly topical and relevant to this subject, and in this case to the US housing market.
Looking at the UK housing market, most people, whether they appreciate it or not, adhere to a deadline. Buying and selling in spring is usually focused around school holidays (Easter or summer) and moving within the chosen break to ensure children are set for the new term ahead. This may not apply to you, but it may well do to someone in the purchase chain. The other one is wanting to be in a new home for Christmas, a busy time for completions for conveyancers, mortgage providers, and brokers/agents alike.
The recent statistics suggest that house prices in the UK have risen in 2018 overall, however there are significant regional variations, as there always have been. Overall, thus far, English house prices have increased by 2.7% in June 2018 (next update due 19/09/2018 / Source: www.gov.uk), with the average house price now being £245,076.
An informative website through which to view variations in house prices can be found here: https://www.gov.uk/government/news/uk-house-price-index-for-june-2018
However, in London and the South East, prices have largely been flat (+0.6% South East and -0.6% London) with the number of English transactions falling by 19.3% in April 2018 (26.0% in London) (Source: www.gov.uk) . Will this continue? No one knows, and the outcome of Brexit negotiations may have a bearing on future trends.
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Bank of England base rates have risen, only slightly, by 0.25%, to 0.75% in August (still close to historic lows), and this will apply prompt upward pressure to mortgage costs, although it is of note that there has been much recent criticism that this uplift has not been passed on to savers' deposit rates.
From another perspective, auto-enrolment pension costs are also rising in 2019, having already increased in 2018, and this may restrict some mortgage affordability.
For the moment, UK inflation has settled back slightly to 2.3% (CPI / Consumer Prices Index), however this is still higher than in recent years and may indicate a move away from the last decade of ultra-low inflation experienced by most.
What do these points prove? On their own, not much, but as a collective they may be an indication that UK economics, even global economics, may be about to evolve, with upward pressures on costs. And if this was the case (certainly not guaranteed), are you ready?
We usually advocate that individuals and households maintain an emergency deposit fund, usually about 3-6 months' income, to cushion against unforeseen changes, emergencies or just for security. This may be cash deposit funds, Premium Bonds or other National Savings & Investments holdings as examples, that are easily accessible, in case there is a call for the funds. However you manage your budget, be ready for change when it occurs. Contact Chapters Financial for your financial planning needs this autumn.
No individual financial advice is provided during the course of this blog.
Keith Churchouse FPFS
Director, CFP Chartered FCSI
Chartered Financial Planner
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