News in Review

“Our job is to get inflation down”

At its meeting last week, the Bank of England’s Monetary Policy Committee (MPC) narrowly voted to maintain Bank Rate at 5.25%, ending a run of 14 consecutive increases.

Five members voted to keep the rate at 5.25%, while the four dissenting voices all favoured another 0.25% increase to 5.5%. The tight decision mirrored the views of forecasters, who had themselves been divided over whether Bank Rate would increase again.

With the MPC’s decision, the rate remained unchanged for the first time since December 2021. Although Bank Rate remains at its highest level for 15 years, the change of tactic will likely bring some relief to homeowners, especially those on tracker, discounted or variable rate mortgages.

The day before the MPC’s decision, official figures from the Office for National Statistics (ONS) had revealed that inflation dropped to 6.7% in the year to August, down from 6.8% a month earlier. This was the third successive month in which inflation had fallen, with a slowdown in rising food prices, as well as a drop in air fares and accommodation costs all contributing to the lower rate.

Despite falling last month, UK inflation remains higher than in most other developed countries. Recent data in Germany (6.4%), France (5.7%), Italy (5.5%) and the US (2.5%) have all come in lower.

In response to the UK’s September data, Chancellor Jeremy Hunt said, “Today’s news shows the plan to deal with inflation is working – plain and simple.” Andrew Bailey, Governor of the Bank of England, struck a more cautious tone, however. He commented, “I can tell you that we have not had any discussion… about reducing rates, because that would be very, very premature. Our job is to get inflation down.”

OECD puts Germany at the bottom

Last week, the Organisation for Economic Co-operation and Development (OECD) released new forecasts that reiterated the expectation of a slowdown in the world economy. The release stated that higher interest rates and weaker global trade were the leading causes, and that Germany is braced to experience the worst effects.

Indeed, along with Argentina, Germany is expected to be the only G20 economy to shrink in 2023. Meanwhile, the UK’s predicted growth of 0.3% will be the third weakest in the G20. In 2024, moreover, the OECD cut the UK’s expected growth rate from 1% to 0.8%, which would make it the G20’s second worst performer. On inflation, the UK is predicted to have a higher rate than anywhere else in the G20 except Turkey and Argentina, with an estimated average rate of 7.2% this year.

UK consumer confidence nudges higher

In more positive news, consumer confidence increased in the UK in September, according to the latest iteration of GfK’s Consumer Confidence Index, which was released on Friday. With a rise of four points, overall confidence reached -21 in September, the highest level since January 2022. Additionally, all five measures – Personal Financial Situation (past and future), General Economic Situation (past and future) and Major Purchase Index – had risen compared to the previous month.

Sunak slams brakes on green transition

Last Wednesday, Prime Minister Rishi Sunak confirmed that a ban on new petrol and diesel car sales, originally scheduled to come into effect in 2030, was being pushed back to 2035 as part of a wider rethink about the country’s journey towards net zero.

Phasing out petrol and diesel sales by 2023 was part of a plan to accelerate the transition to electric vehicles, a move that experts say will be crucial to achieving net zero emissions by 2050. In response to the announcement, the Society of Motor Manufactures and Traders (SMMT) raised concerns that the delay could dissuade drivers from switching to electric vehicles.

Among car makers, there was a mixed response. Ford was vocal in its condemnation of the change, while Stellantis, which owns Vauxhall, Peugeot, Citroen and Fiat, confirmed that it is still ‘committed to achiev[ing] 100% zero emission new car and van sales in the UK and Europe by 2030.’  In contrast, Jaguar Land Rover praised the government’s decision as ‘pragmatic’, commenting that it ‘brings the UK in line with other nations, which we welcome.’

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (27 September 2023)

Residential Property Review – September 2023 

Economic uncertainty weighs on the residential market 

The most recent UK Housing Market Update from Savills has highlighted that buyers’ budgets continue to be impacted by higher mortgage rates, and although inflation has begun to move lower, core inflation remains ‘unexpectedly sticky.’  

During July, with completed sales reducing by 18% on the 2017-19 average, market activity was notably subdued, according to HM Revenue & Customs (HMRC) data. Accordingly, during the three-month period to July, mortgage approvals were 23% below 2017-19 levels and sales agreed were 12% below the average (2017-19 levels). 

In its report, Savills referred to the most recent Royal Institution of Chartered Surveyors (RICS) survey, in which most surveyors reported decreasing demand and supply, which is likely to continue suppressing activity and house prices over the coming months.  

Looking at UK annual rental growth, Hamptons Lettings index has shown that the cost of renting a new property was 12% higher in August compared to the previous year. The biggest increase was in Greater London, rising by 17.1% year-on-year to bring the average to £2,332 per month. After that comes Scotland, with an increase of 13.4%. 

Improved EPC ratings see green price premium 

Research by Rightmove has found that 78% of homeowners would be motivated to make changes if their energy bills reduced. The higher a home’s energy performance certificate (EPC) rating is, the lower the property’s energy bills are likely to be. 

The analysis of 300,000 properties that have sold twice in the last 15 years, and have had a new EPC certificate issued, shows there is an additional green premium on top of local house price growth over time. 

A home with an EPC rating improving from D to C could see an average increase in value of 3%, or £11,157. While moving from an F to a C rating could increase the property’s value by an average of 15%, or almost £56,000, when looking at the current national average asking price. 

The highest yielding areas for buy-to-let property 

The average gross rental yield in the UK is currently 5.03%, based on an average buy-to-let property costing £263,000 and an average rental of £1,163 per month, according to Zoopla’s September Rental Market Report. 

The region with the highest rental yields is the North East, where the average gross yield is 7.2%. The North East’s yield appeal is largely thanks to the investment triangle of Hartlepool, Sunderland, and Middlesborough where gross yields sit between 8.01% and 8.39%. Following the North East is Scotland (7.1%) and the North West (6.3%).  

The highest yielding cities in the UK are Sunderland, Dundee and Burnley, which offer a gross yield of between 7.7% and 8.4%. London has the lowest gross yield (4.7%) in the UK owing to the cost of buying a property there. This is despite average rents in London reaching £2,053 this month. 

All details are correct at the time of writing (20 September 2023) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

Commercial Property Review – September 2023

Private investors acquire £1.3bn of London office assets over 12 months 

Knight Frank’s latest research report on the capital’s office market has highlighted that over the last year, family offices and ultra-high-net-worth individuals have purchased £1.3bn worth of London office assets.  

Such high transaction volumes by wealthy private investors have been a by-product partly of the volatility caused by rising interest rates, combined with weak sterling, less competitors and subdued capital values, providing plentiful purchasing opportunities.  

The £1.3bn spend represents a 44% share of central London office investments, an increase from the long-term average (36%). 

With fewer prime assets listed, wealthy buyers spent £690m over the last year on secondary stock. Also referred to as ‘brown’ buildings, these properties need capital expenditure in order to satisfy contemporary sustainability and workplace standards. The value of deals in the secondary stock market averaged £62m over the last 12 months as buyers targeted smaller lots to minimise debt. 

RAAC concrete issues impact on commercial property owners  

Following the recent RAAC (Reinforced Autoclaved Aerated Concrete) controversy, The Institution of Structural Engineers, has urged owners of older commercial property buildings to get their properties surveyed in order to identify or eliminate the possibility of the presence of the concrete, which is prone to collapse. 

The advice urged, ‘If a building owner or manager has a building from this period and is unsure of the form of construction, they should carry out an inspection and a risk assessment. If RAAC planks are present, their structural condition will need to be determined by a Chartered or Incorporated Structural Engineer.’ 

The lightweight concrete, used primarily for flat roofs, was used in construction during the 1950s to mid-1990s. Although most widely used in the public sector, it was also used in commercial office buildings, factories, warehouses and shops. 

Commercial buildings with RAAC are less common due to the redevelopment cycle, with commercial developers more likely to have addressed its presence during ongoing repairs, maintenance or during building upgrades.  

Life science, laboratory and tech sector shows ‘exceptional rental growth’ 

The latest UK Commercial Market in Minutes from Savills has detailed a positive occupational story from the life science, laboratory and technology sector, with investors and developers who were ahead of the curve in terms of renewed interest in the sector, benefiting from solid letting activity and ‘exceptional rental growth.’ 

Investment from overseas, combined with M&A activity has driven some key deals, one prime example being Moderna’s signing of a significant pre-let at Harwell Campus, Oxfordshire, within the so-called ‘golden triangle’ of Oxford, Cambridge and London. 

It seems that a critical factor in driving future growth will be the decision regarding whether the UK will remain a partner of the European Horizon funding programme for scientific research.  

All details are correct at the time of writing (20 September 2023) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

News in Review

“The broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months”

Latest official figures from the Office for National Statistics (ONS) estimate that the UK economy contracted by 0.5% in July. The reduction was higher than the 0.2% decline which had been forecast by a poll of economists and follows a 0.5% increase in June.

The biggest monthly contraction since December 2023, the data released last week showed that contributing factors to this reduction in monthly real gross domestic product (GDP) were strike action by teachers and NHS workers, with the wet weather during the month also impacting the retail and construction industries. Manufacturing also suffered in the month, following a rebound from the effect of the extra bank holiday in May.

Although a monthly decline was registered, Darren Morgan, ONS Director of Economic Statistics, did highlight, “The broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months.”

Following the data release, Chancellor Jeremy Hunt commented, “There are many reasons to be confident about the future. We were among the fastest in the G7 to recover from the pandemic and the IMF (International Monetary Fund) have said we will grow faster than Germany, France and Italy in the long term.”

Triple lock uncertainty

As things stand, the full basic State Pension rises every year in line with the highest of three factors – September’s wage growth, inflation or 2.5% (the triple lock). With new ONS data for the three months to July showing pay including bonuses increased by 8.5%, if earnings growth remains this high and outpaces inflation in September, it could push up the new State Pension to over £11,000 a year in 2024. The new flat rate State Pension would be £221.20 per week, while the old basic State Pension would be £169.50 per week according to preliminary calculations.

However, last week, Mel Stride, Work and Pensions Secretary said that although the government remains “committed” to the triple lock, it is understood that officials are considering applying a lower earnings figure, by stripping out the effect of bonuses to public sector workers. If this were implemented it would bring the figure used closer to 7.8%, the overall rate excluding bonuses. It has been reported that Treasury officials are considering this ‘one-off break.’

Eurozone interest rate hits record high

On the continent last week, the macro focus rested on the September European Central Bank (ECB) meeting, during which a decision was made to increase the Bank’s deposit rate by 0.25 percentage points to 4%, as the struggle to control inflation continues. The tenth consecutive increase in 14 months, rates have now reached their highest level in 24 years, since the single currency was launched in 1999.

The ECB did signal that this could be the last hike for a while, citing in a press release last Thursday that, ‘The Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target. The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary.’

Average inflation in the 20-nation bloc is projected to be 5.6% this year, before falling to 3.2% in 2024 and 2.1% in 2025. The ECB’s medium-term target is 2%.

Bank Rate expectations

The Bank of England’s Monetary Policy Committee (MPC) publishes the summary of its next meeting on 21 September and faces a similar decision regarding the direction of Bank Rate. A poll of economists is predicting a hike of 25 basis points to 5.5%, which would take the rate to its highest point in over 15 years.

The US Federal Reserve are also meeting this week to discuss monetary policy. With three scheduled meetings for the rest of the year, it will be interesting to see what moves they make to fulfil their targets of controlling inflation and maintaining full employment.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (20 September 2023)

The impact of age on life insurance?

Age is a key factor in determining cost when you take out life insurance. Generally, the younger you are when you purchase a policy, the less expensive your regular premiums will be, because younger people are statistically less likely to die than older people, so the risk to the insurer is lower. 

Assessing the risks 

Insurers consider how likely it is that they will have to pay out a claim if you were to die during the term of the policy. As you age, the cost of new life insurance cover generally increases because the likelihood of death increases. This is especially true for people who have developed health issues or who engage in risky behaviours such as extreme sports or smoking. 

For example, a 25-year-old non-smoker in good health is likely to pay significantly less for the same level and duration of cover than a 65-year-old smoker with a history of health problems. Insurers will also consider your age when determining the length of the policy term, with longer terms generally being available to younger people. Many insurance companies offer a maximum term of around 40 years, but maximum age limits can vary. 

It’s not all about age 

Your age is just one factor that will affect the cost. The insurance company will also consider your overall health, lifestyle, occupation, family medical history and the length of policy you require. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

Joint mortgages for FTBs

Traditionally, when thinking about joint mortgages, most people picture a married couple. Increasingly, however, friends or siblings are taking out joint mortgages when they buy their first home together. 

Stronger together 

A joint mortgage is the most popular way for first-time buyers (FTBs) to fund their home purchase, with more than six in ten opting for one1. 

Buying with someone else means you can split the costs. Saving enough money to pay the deposit is one of the biggest hurdles for FTBs, with joint mortgages allowing buyers to share the burden. Likewise, monthly payments can be made together and your joint earnings will be used to determine how much you can borrow. 

Joint or common? 

A joint mortgage works the same way as a normal residential mortgage. Lenders usually allow groups of up to four people to apply for a joint mortgage. The big decision is whether to be joint tenants or tenants in common: 

  1. Joint tenants essentially act like a single owner. You all have equal rights in the home, you split the profits equally when selling and, should one borrower die, the others will inherit their share. 
  1. Tenants in common have separate interests in the whole property. This means that you can choose how to split the ownership, with one person, perhaps, paying a bigger deposit in return for a bigger share of the value when sold. 

Do you trust each other? 

Before applying for a joint mortgage with a group of friends, make sure you know the commitment you are taking on. For example, if one person is unable to keep up with payments, the others must cover the full amount. 

1Halifax, 2023 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. 

News in Review

“India is going to be one of the most significant countries geopolitically over the next years and decades, and it’s vitally important for the UK to deepen our ties”

The G20 summit concluded in Delhi on Sunday with a joint declaration that denounced using force for territorial gain but fell short of explicitly condemning Russia. Ukraine reacted angrily to the watered-down wording about the war, with foreign ministry spokesperson Oleg Nikolenko saying that the G20 had “nothing to be proud of”.

At the summit, several significant deals were agreed. On Saturday, Prime Minister of India Narendra Modi and President of the European Commission Ursula von der Leyen, announced a new project to build an economic corridor linking Europe with the Middle East and India via rail and sea.

The G20 members also made further ground on climate. The bloc announced a 100% consensus to ‘pursue and encourage efforts to triple renewable energy capacity globally through existing targets and policies’. Meanwhile, the summit launched a global biofuel alliance between India, the US and Brazil to boost the use of cleaner fuels.

The African Union was inducted as a new permanent member, part of an effort by India to make the G20 more inclusive. When Mr Modi closed the summit on Sunday afternoon, he handed a ceremonial gavel to Brazil’s President Luiz Inacio Lula da Silva, who is taking over the presidency.

UK Prime Minister Rishi Sunak had his own mission for the summit: the prospect of finalising a free-trade agreement with India. Before the trip, a spokesperson told reporters that, “As the first British Prime Minister of Indian descent, his visit will be an historic moment.”

Afterwards, Mr Sunak said “What you’ll see in the communique is strong language, highlighting the impact of the war on food prices and food security.” A further round of talks between India and the UK have been scheduled for late September. Mr Sunak added, “Without question, India is going to be one of the most significant countries geopolitically over the next years and decades and it’s vitally important for the UK to deepen our ties, particularly economically and more broadly, with India.”

Autumn Statement date confirmed

Last week, Chancellor of the Exchequer Jeremy Hunt announced that he will present this year’s Autumn Statement to Parliament on 22 November. The government also confirmed that the Office for Budget Responsibility (OBR) has been commissioned to prepare an economic and fiscal forecast that will be presented to Parliament alongside the Autumn Statement, reinstating the practice a year after former Chancellor Kwasi Kwarteng snubbed the OBR forecasts for his ill-fated ‘mini-budget’ in September 2022.

Wage growth outstrips inflation

On Tuesday, Office for National Statistics (ONS) latest employment data revealed that basic wage growth in July outstripped the rate of inflation for the first time in more than 18 months. Up 7.8% compared to the same month a year ago, excluding the effects of bonuses, this was a 22-year high for the figure.

The full ONS report, however, presents a more nuanced picture of employment and wage dynamics.

Between May and July, for example, the UK’s employment rate was estimated at 75.5%, slightly lower than the previous quarter (February to April 2023). Payrolled employees remained largely unchanged in August from the previous month.

Meanwhile, unemployment rose by 0.5% between May and July compared to the previous quarter.

China’s economy stumbles again

Official figures released last week showed that China’s exports have fallen for a fourth consecutive month, amidst weak demand at home and abroad. Exports dropped by 8.8% in August compared with a year earlier and imports fell 7.3%. Despite staying in the red, those declines still surpassed expectations and signalled an improvement on the previous month.

As well as a slump in global demand for Chinese-made goods, the country is facing several post-pandemic challenges at home, including a property crisis and weak consumer spending.

A spokesperson for the Chinese foreign ministry told a regular news briefing on Tuesday that China’s economy had great potential and that the fundamentals of long-term improvement had not changed.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (13 September 2023)

Investment myths

To many, the world of investing is shrouded in mystery; the realm of financial whizz-kids and the super-rich. In reality, however, this is not the case and, once myth is separated from reality, it should be clear that investing is actually accessible to all. 

Can’t invest, won’t invest! 

Research1 has highlighted several reasons why people are sometimes reluctant to invest. The main one, cited by 45% of respondents, is because they don’t have sufficient money, while 23% feel they are not knowledgeable enough about investing and 21% are worried about losing money. 

Only for the rich? 

These findings mirror a number of common misconceptions surrounding investing, one of which is that only wealthy people invest. However, while this may have been the case in the past, it is certainly not true nowadays, with investment options available for people with relatively small sums to invest. 

Expertise and devotion required?  

Other common investment myths include the idea that you have to be a stock market genius and monitor your investments on a daily basis. Both of these are untrue: advice is readily available to guide novice investors throughout their investment journey, while taking a long-term approach is always advisable. 

Too risky by far? 

While it is true that all investing involves risk, not all investments are similarly risky. So, anyone who is worried about losing money can take a more cautious approach by holding a greater proportion of less-risky assets in their portfolio. 

Help at hand 

If you’re new to investing then get in touch and we can help get you started. We’ll show you that investing is not just for the very wealthy but it does give everyone a chance to potentially secure a higher return on their hard-earned cash. 

1HSBC, 2022 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Think carefully before securing other debts against your home. Equity released from your home will be secured against it. 

Over 50s reconsidering life insurance

Continued high inflation is prompting over 50s to reconsider whether they really need their life insurance policies, research has suggested1, sparking fears of vulnerabilities. 

Cutting costs 

A survey of 1,000 people aged 50+ has shown that 22% of customers are thinking about cancelling their monthly payments as a result of the rising cost of living. Those with fixed incomes, such as retirees, are particularly susceptible to rising prices, the research claims. 

Although cutting back on spending might be a necessary choice, cancelling life insurance policies can end up costing you and your loved ones further down the line. As well as leaving your family without key protection now, if you cancel your policy, it will likely cost you more in future should you choose to take out a new plan. 

Gender imbalance 

Women were more impacted than men, according to the research. Some 20% of women with an over-50s life insurance plan are considering no longer paying, compared with 17% of men. 

Think carefully 

Protection is an essential part of long-term financial planning for everybody. In the short term, rising costs are posing challenges for many. But having the right insurance cover for your unique needs is an indispensable safety net for you and your loved ones. 

Before you cancel your life insurance payments, it is important to think of the wider impacts for your financial commitments. Get in touch. 

1Scottish Friendly, 2023 

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. 

Your financial empowerment toolkit

Traditionally, people might have assessed their financial health by simply checking the balance on their bank account or totalling their amassed level of wealth. In recent years, however, a different measure has emerged which seeks to balance financial stability with emotional wellbeing. 

Financial empowerment 

This new concept places greater emphasis on goals and developing a financial plan to achieve life’s aspirations; in other words, it’s about people gaining control over their finances rather than their finances controlling them. Achieving genuine financial empowerment does not therefore focus simply on someone’s level of wealth, but on handling that money so it has a truly positive impact on their wellbeing. 

A state of mind 

In many ways, financial empowerment is about understanding the emotional relationship with money by focusing on an individual’s mindset as well as their finances. Taking time to strategise, by aligning spending and savings commitments with long-term goals while being prepared for life’s unexpected financial challenges, can provide a logical, ordered approach that brings satisfaction and pride to our financial lives. In effect, it creates control that affords a sense of financial freedom and thereby puts us on track to a fulfilling, well-lived life and retirement. 

Empowerment versus income  

Analysis1, which compares people’s emotional experiences with their level of empowerment and earnings, offers further valuable insight. It found that financially empowered people had mostly positive experiences, even those in lower income brackets, while those who felt disempowered were generally less happy with their finances than their peers. This suggests that a sense of personal power rather than someone’s income level is the key to achieving emotional wellbeing in their financial lives. 

It’s all in the planning 

Financial empowerment effectively derives from equipping ourselves with the right tools. With the clear, transparent advice and professional support our firm provides, we can construct a well thought-out, long-term but flexible plan that will allow you to live the life you want and thereby achieve true financial empowerment. 

1Morningstar, 2023 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.