News in Review

Last week’s release by the Office for National Statistics (ONS) of its quarterly gross domestic product (GDP) estimate for July to September painted a picture of a shrinking UK economy.

GDP fell by 0.2% in the third quarter, slightly less than predicted by some City economists, but enough to push the UK a step closer to recession. The Bank of England has forecast a ‘prolonged’ downturn, potentially the longest on record.

The Q3 economy slowed in output terms, with the services, production and construction industries all stalling. Notably, production fell by 1.5%, with all 13 sub-sectors of the manufacturing sector negative for the quarter.

Meanwhile, real household expenditure fell by 0.5%. High inflation has caused many households to cut back on spending, which in turn creates a drag on the economy.

Chancellor Jeremy Hunt said, “I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability… What we need is a plan that shows how we are going to get through this difficult period.”

Autumn Statement – what’s in store?

In response to these difficult economic conditions, the government is expected to announce around £35bn of spending cuts and £20bn of tax rises in the Autumn Statement, due to be delivered on Thursday.

Speaking last Sunday, Mr Hunt stressed that, “I’ve been explicit that taxes are going to go up.” Analysts predict that the extra tax revenue will be generated by freezing tax thresholds.

A decision on pensions is expected too. New Prime Minister Rishi Sunak has not yet confirmed whether the Triple Lock, which ensures the State Pension rises each year in line with the highest of either inflation, average earnings or 2.5%, will remain in place.

The NHS, schools and police could all be affected by spending cuts, with budgets allocated in 2021 expected to be frozen until 2025.

US midterms

Democrats have kept control of the Senate in a better-than-anticipated midterms performance for the ruling party. The Senate success is a significant moment for Joe Biden’s presidency, which will put a spring in his step going into the second half of his term. The Republicans, meanwhile, are on the verge of securing the House of Representatives.

COP27 enters its final days

The UN’s annual climate summit continued in Egypt, with more tough talking from politicians and stakeholders. Fresh from his election success, Mr Biden delivered a speech in which he said, “The climate crisis is about human security, economic security, environmental security, national security and the very life of the planet.”

The key outcomes of the conference remain to be agreed, however, as the two-week event enters its final days. Perhaps most importantly, discussions are ongoing about watering down the target of limiting the average global temperature rise to 1.5 degrees Celsius. This is the level, according to climate scientists, above which the worst consequences of climate change will be felt.

Employment data

The UK unemployment rate rose slightly to 3.6% in the three months to September, Office for National Statistics data revealed on Tuesday. The Bank of England has already warned that unemployment will nearly double by 2025 as the UK enters recession.

Wages rose by 5.7% in the year to September, the fastest rate (excluding the pandemic) in more than 20 years. Adjusted for rising prices, however, the picture looks less rosy, with real wages falling by 2.7%.

London stock market loses top spot

London has lost its crown as Europe’s biggest stock market to Paris as economic growth concerns weigh on UK assets. Paris has taken the top spot after the combined market capitalisation of its major share exchanges overtook those in the UK capital. According to data from Bloomberg the combined value of British shares is now around $2.821trn (£2.3trn), while France’s are worth around $2.823trn.

This marks a huge reversal of fortunes for the London Stock Exchange, which was worth about $1.4trn more than its French rival back in 2016.

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.

Trending – ‘living legacies’

Over-55s are increasingly looking to help their families out financially while they are still alive, rather than leaving everything in the form of an inheritance. Research1 has revealed a trend towards ‘living legacies’, due to increased life expectancy pushing up the average age at which younger generations inherit from their parents. People born in the 1980s are now predicted to receive their inheritance at age 64 on average, compared to 58 for those born in the 1960s.

Historically, the risk of running out of money during retirement has prevented many older people from offering financial support during their lifetime. This concern appears to be lessening, however, with a third of researchers’ respondents saying they’d be unwilling to help a family member onto the property ladder without knowing how much they’d need in retirement – against half of respondents to the same survey in 2016.

Aviva’s Matt McGill commented, “This increasing tendency towards considering helping out now rather than beneficiaries receiving an inheritance after death is perhaps a reflection of the turbulence and uncertainty that everyone has been through since we previously ran our survey in 2016, and which shows no sign of diminishing. Along with the hardship people have faced, it’s also been a time of reflection for many and this could have included a resolution to live more for the moment and help family and loved ones now.”

1Aviva, 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.

Selling with success

Planning to sell? You already know there’s a lot of big things to think about. But don’t neglect the small details either.

Seemingly minor changes can make a significant difference to how a property is perceived and, ultimately, its sale price. Here are three top tips for putting the finishing touches to your home before listing it for sale.

1. Appearances count

If you’ve been putting off any DIY tasks, now might be the time to finally get them done! Presenting a well-maintained property shows prospective buyers that the house has been well cared for, which will reassure them that there won’t be any nasty surprises. In contrast, if buyers notice obvious DIY shortfalls, they’ll factor the costs of carrying these out into their offer price.

2. Lose the quirks

It’s a good idea to remove some of the more personal objects and displays around your home. Without making it feel like an empty white box, you can help prospective buyers better imagine themselves living in your house by taking away your most glaring quirks.

3. Define rooms

Over time, rooms can end up evolving away from their original purpose – intentionally or not. This is normal but when it comes to selling, clarity is key. If the spare bedroom has become a storage depot, converting it back to its original purpose can help showcase the space and market the house more effectively.

Big and small

Having someone on your side to help with the big decisions can help you stay in control of every little detail. Get in touch, we can help.

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

“The road ahead will be a tough one… but the economy will recover, and inflation will fall”

At the latest meeting of the Bank of England’s Monetary Policy Committee (MPC) concluding on 3 November, Bank Rate rose by 0.75 percentage points, an eighth consecutive increase and the biggest for 33 years.

Members of the MPC voted by a majority of seven to two to raise Bank Rate to 3%; of the two dissenting voices, one preferred an increase of 0.5 percentage points and the other a smaller 0.25 percentage point rise. Borrowing costs are now at their highest since 2008.

After the vote, Andrew Bailey, Governor of the Bank of England, repeated that the Bank’s primary objective was to bring down inflation, which last month rose at its fastest rate in 40 years. He commented, “The road ahead will be a tough one… The level of economic activity in our economy is likely to be flat, and even fall, for some time but the economy will recover, and inflation will fall.”

Indeed, the MPC is forecasting that gross domestic product (GDP) will continue to fall throughout 2023 and into 2024, while unemployment – currently at its lowest level for 50 years – is set to almost double to 6.5%. Latest projections by the MPC reveal ‘a very challenging outlook for the UK economy’, with recession ‘for a prolonged period’. The minutes of the next MPC meeting will be published on 15 December 2022.

Similar story across the pond

A day earlier, the US Federal Reserve also raised its key interest rate by 0.75%, a fourth consecutive three-quarter point rise. Now at a target range of 3.75% to 4%, the highest level since 2008, the rate hikes seem likely to continue. Indeed, speaking shortly after the meeting, Chairman Jerome Powell signalled that the Fed’s work is far from finished, “We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”

In the same speech, however, Mr Powell suggested easing off on the pace of rises might be possible sooner rather than later, “It may come as soon as the next meeting [in December] or the one after that … No decision has been made” he added.

COP27 underway in Egypt

As the COP27 summit kicked off in Egypt, the United Nations Secretary General, António Guterres, used his opening address to warn that, “We are on a highway to climate hell with our foot still on the accelerator.”

On Monday, world leaders descended on the Egyptian city of Sharm El-Sheikh to begin two weeks of negotiations on climate action. Prime Minister Rishi Sunak, having U-turned on his decision not to attend the conference, spoke about the importance of energy security, “Putin’s abhorrent war in Ukraine and rising energy prices across the world are not a reason to go slow on climate change” he said. “They are a reason to act faster.”

More stark words came from the Kenyan President William Ruto, who stressed the need for rapid action, “Further delay will make us busy spectators as calamity wipes out lives and livelihoods” he said.President Joe Biden is expected to attend later this week after the US midterm elections.

A major talking point of the opening days of the summit was the decision to include ‘loss and damage’ on the agenda. After negotiations that dragged on until Sunday morning, developing countries finally got their way; the possibility of reparations paid by rich countries for the impacts of climate change will now be officially discussed at COP for the first time.

Markets

Tuesday’s primary focus for markets was on the crucial US midterm elections that will determine control of Congress. London stocks closed just above the waterline, with the FTSE 100 ending the session up 0.08% at 7,306.14 and the FTSE 250 closing ahead 0.75% at 18,697.89.

Wall Street ended the day higher, with investors betting on a political stalemate that could prevent major policy changes. It was the third straight day of gains on the US stock market, leaving the Dow Jones down less than 10% year-to-date, to close on 33,160.83. The S&P 500 was 0.56% firmer at 3,828.11.

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 (9 November 2022)

Climate change for investors

As the world continues to emerge from the pandemic, although other headwinds exist, governments, businesses and the financial world are refocusing on what the Principles for Responsible Investment (PRI) describe as ‘the greatest threat to the wellbeing of humanity and to the ecosystems on which we depend’ – climate change. 

According to the PRI, a United Nations-supported initiative, many are now recognising ‘the enormous opportunity for economic growth and investment returns presented by the transition to net-zero emissions.’ The PRI reflect a firm belief that ‘the financial sector and the investment community will play a central role in the global response to climate change and supporting the transition to a net-zero economy.’ 

COP27 

A year after the United Nations 26th Conference of the Parties, on British shores, the upcoming COP27 climate conference is taking place in Sharm El-Sheikh, Egypt this November. Last year, delegates from almost 200 countries agreed upon the Glasgow Climate Pact at COP26, which builds upon targets set out in the Paris Agreement, an international legally binding treaty intended to limit global warming to 1.5 degrees Celsius. Key pledges made by governments last year included commitments to end deforestation, cut global methane emissions and to transition to zero-emission vehicles. Countries were asked to return to this year’s conference with a plan to strengthen their 2030 commitments. 

“A decisive decade for climate action”  

Mahmoud Mohieldin, the UN climate change high-level champion for Egypt, hopes the 2022 conference will be an important milestone in what he calls “a decisive decade for climate action.” In his view, COP27 should undertake an “urgent, ambitious, impactful, and transformative agenda, guided by a holistic approach to sustainable development,” based upon the principle of equity and informed by science. 

“In light of the goals and objectives… we will promote a stronger focus on implementation, transforming commitments into actions and translating the pledges of the summits into solutions in the field,” he continued, “While acknowledging the complexities of the different political, economic and developmental challenges, it is incumbent on us all to raise the threshold of action at COP27.” 

Climate change for investors 

COP27 will undoubtedly be of interest to investors engaged with climate change, with key announcements potentially impacting their portfolios. Investment decisions have a role to play, and the investment industry continues to play a pivotal role in the global climate transition. One investor initiative – The Net Zero Asset Managers Initiative – has now grown to over 270 investor signatories with over $60trn assets under management – all committed to supporting the goal to reach net zero and investments aligned with net zero emissions. 

COP provides an opportunity for institutional investors to consider how they can innovate in developing solutions to solve climate issues and in financing sector transition. PRI deduce that, ‘Investors increasingly recognise the threat posed by climate change to the global economy, and therefore to their ability to meet the needs of their beneficiaries over the decades to come… They understand the imperative to engage with the companies in which they invest, and the policymakers who write the laws, to ensure that both groups respond appropriately to the threats and opportunities involved.’ 

Pensions – saving for your children’s future

It may be an old adage, but definitely one that remains true – it really never is too early to start a pension. So, if you’re looking to help secure the long-term financial future of your child, or grandchild, saving into a pension on their behalf may be a suitable option worth considering, in addition to provision for earlier decades. 

Tax incentives and compound returns 

In some ways, saving for a child’s pension when they are so far from retirement can seem odd but it can actually make sound financial sense. Junior pensions can be set up as soon as a child is born and contributions up to £2,880 per annum attract tax relief of 20% from the government. Another benefit of saving at a young age is the power of compounding returns which provide growth on growth across the years. 

Small amounts add up 

These two factors mean you don’t have to save huge sums to make a big difference; saving little and often really can add up in the long term. Current rules allow savings of up to £2,880 per annum into a child’s pension. 

Fulfilling and rewarding  

Providing financial security for children, or grandchildren, is a key goal for many and saving on their behalf can therefore be fulfilling for you and rewarding for them. If you’d like to give your loved ones a financial head start, then get in touch. 

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. 

Housing market resilience

The number of home movers fell 35% year-on-year in the first half of 20221, a drop that was widely expected following last year’s uniquely busy pandemic-influenced market. 

Still high 

In total, 172,510 people moved house in the first six months of this year, well below the 266,270 who moved in the first half of 2021. Last year’s record, however, was heavily influenced by the government’s Stamp Duty holiday and pent-up demand from lockdowns. Indeed, excluding 2021, this year has seen the busiest start to a year for home moves since 2008. 

Trends 

All UK regions have seen the number of home movers fall in 2022, with Greater London experiencing the biggest decline (45%). Last year, detached homes consolidated their top spot for home moves, accounting for a 7% higher share than a decade ago. Home movers have also become slightly younger in the last ten years, with the average age now 40, compared to 41 a decade ago. 

Resilience 

Despite the challenging circumstances, the housing market remains resilient. We can guide you through the busy market and help you stay focused on your goals. 

1Halifax, 2022 

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

Economic Review – October 2022

Chancellor’s fiscal statement delayed

The government has pushed back the date of its much-anticipated Medium-Term Fiscal Plan in order to ensure it is based on the “most accurate” economic forecasts available.

Chancellor Jeremy Hunt had been due to deliver his first fiscal statement detailing how the government plans to repair the country’s public finances on 31 October, but following Rishi Sunak’s appointment as Prime Minister, it was decided to move the announcement back by two-and-a-half weeks.

The fiscal event, which will now be delivered on 17 November, has also been upgraded to a full Autumn Statement, paving the way for wider taxation policies to be announced. The Chancellor’s tax and spending plans will also be accompanied by updated economic growth and borrowing forecasts produced by the independent Office for Budget Responsibility (OBR).

When announcing the postponement, Mr Hunt said, “Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way. I’m willing to make choices that are politically embarrassing if they’re the right thing to do for the country, if they’re in the national interest.”

Financial markets were relatively calm after the news broke with analysts describing the delay as understandable, and both sterling and government bond prices were little changed by the announcement. The International Monetary Fund, which had criticised the previous Chancellor’s unfunded tax cuts, offered support to the incoming Prime Minister, with the organisation’s Chief Kristalina Georgieva suggesting Rishi Sunak will bring “fiscal discipline” to the UK.

The Chancellor has been keen to demonstrate his fiscal credentials, reiterating his commitment to “debt falling over the medium term.” This suggests the government will have some tough tax and spending decisions to make in order to fill the budget black hole, with Treasury officials warning people “should not underestimate the scale of this challenge.”

Inflation back at 40-year high

Soaring food prices have pushed the UK inflation rate back to a four-decade high, fuelling expectations of a sharp interest rate hike at the next Bank of England (BoE) Monetary Policy Committee (MPC) meeting in early November.

Data released last month by the Office for National Statistics (ONS) showed that the headline rate of inflation rose to 10.1% in September after dipping to 9.9% in August. This was slightly above analysts’ expectations and took consumer price inflation back to a 40-year high previously hit in July.

The food and non-alcoholic drinks sector was the biggest upward contributor to September’s rise, with prices in this category recording their biggest jump since April 1980. ONS said the price of most key items in an average household’s food basket rose, including fish, sugar, fruit and rice, as the war in Ukraine and recent weakness in the pound made both food products and ingredients more expensive.

This further jump in inflation has placed additional pressure on the BoE to raise interest rates when its next MPC meeting concludes on 3 November. Speaking at a G30 event in Washington in mid-October, Bank Governor Andrew Bailey acknowledged rates may need to rise by more than the BoE had previously envisaged. The Governor said, “We will not hesitate to raise interest rates to meet the inflation target. And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.”

While the Chancellor’s decision to delay his fiscal statement until after the Bank’s November meeting will make policymakers’ deliberations more difficult, analysts still expect them to take decisive action. Indeed, over half of respondents in a recent Reuters poll of economists expect rates to rise by 0.75% in November, with most of the others predicting a 1% increase.

Markets (Data compiled by TOMD)

As October drew to a close, UK stock markets benefited from a Halloween rebound. The blue-chip FTSE 100 index closed the month at a five-week high, up 2.91% to 7,094.53, buoyed by gains across Britain’s high street banks, amid expectations of an imminent Bank Rate rise. The FTSE 250 registered a gain of 4.20%, while the FTSE AIM ended October with a small loss of 0.03%.

On the continent, the Euro Stoxx 50 closed the month up 9.02%. Eurozone annual inflation reached a record high of 10.7% in October, ahead of analyst expectations of 10.3%. In Japan, the Nikkei 225 closed October on 27,587.46, up 6.36%. The Bank of Japan has chosen to maintain ultra-low interest rates, bucking the tightening trend among global central banks.

Across the pond, earnings season is in full swing and US markets are awaiting the highly anticipated Federal Reserve rates meeting in early November. Following a challenging September, markets made a comeback in October, with the Dow closing the month up 13.95% on 32,732.95, its best monthly advance since January 1976. Meanwhile the tech-orientated Nasdaq closed October on 10,988.15, up 3.90%.

On the foreign exchanges, the euro closed at €1.16 against sterling. The US dollar closed the month at $1.14 against sterling and at $0.98 against the euro.

Gold is currently trading at around $1,639 a troy ounce, a loss of 1.96% on the month. Pressure from anticipated rate hikes, rising yields and the relative strength of the dollar are weighing on the precious metal. Brent Crude closed the month trading at around $91 a barrel, a gain of 7.05%, following a decision by the Organization of the Petroleum Exporting Countries (OPEC+) alliance to make sizable cuts to output from November.

UK economy unexpectedly shrinks

Growth statistics released by ONS show the economy unexpectedly contracted in August while forward-looking indicators point to further deterioration following the country’s recent political and market turmoil.

According to the latest gross domestic product (GDP) figures the UK economy shrank by 0.3% in August with output in both the production and services sectors falling back. ONS noted that a number of customer-facing businesses, including retail, hairdressers and hotels, had all fared ‘relatively poorly’ during the month.

August’s figure was significantly weaker than analysts’ expectations, with the consensus from a Reuters poll of economists pointing to zero growth. July’s GDP figure was also revised down to 0.1% from a previous estimate of 0.2%; as a result, output across the three months to August as a whole fell by 0.3%.

Analysts have warned that September could see an even sharper decline, partly due to the extra Bank Holiday to mark the Queen’s funeral and reduction in business opening hours during the period of mourning. Recent survey evidence also suggests the downturn is set to intensify, with October’s preliminary headline reading of S&P Global’s Purchasing Managers’ Index showing the pace of economic decline ‘gathered momentum after the recent political and financial market upheavals.’

Unemployment rate falls again

The latest labour market statistics showed that the rate of unemployment in the UK declined to its lowest level in nearly 50 years, driven by an increase in the number of people leaving the workforce.

ONS figures showed the unemployment rate fell to 3.5% in the three months to August, its lowest level since December to February 1974. This decline, however, was due to an increase in the number of working-age adults who are neither working nor looking for work.

The economic inactivity rate, which measures the proportion of 16 to 64-year-olds who are not in the labour force, rose to 21.7% in the June to August period, an increase of 0.6 percentage points from the previous quarter. This rise was partly driven by an increase in student numbers, as well as a rise in the number of people suffering with a long-term illness, which rose to a record high.

This resulted in the ratio of unemployed people to job vacancies dropping to a record low, despite the latest data revealing a decline in the total number of vacancies. ONS noted that the fall in vacancies was due to a number of employers reducing recruitment ‘due to a variety of economic pressures.’

All details are correct at the time of writing (01 Nov 2022).

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

“Our number one priority is economic stability and restoring confidence”

Last week during the first meeting of the new Cabinet in Downing Street, Chancellor Jeremy Hunt announced the postponement of the government’s fiscal statement from 31 October to 17 November.

Delayed by over a fortnight, the Medium-Term Fiscal Statement, due to be delivered in the House of Commons on Halloween, along with a forecast from the Office for Budget Responsibility (OBR), is now scheduled to be a full Autumn Statement.

Justifying the delay, Mr Hunt said that new Prime Minister Rishi Sunak’s appointment had brought about the “prospect of much longer-term stability for the economy” so a delay will ensure “the right decisions” are made.

He continued, “Our number one priority is economic stability and restoring confidence… but it is also extremely important the statement is based on the most accurate possible economic forecasts and forecasts of public finances.”

The statement is expected to include the OBR’s economic forecast, addressing debt, and plans to put public spending on a sustainable footing.

Next MPC meeting imminent

The Bank of England’s Monetary Policy Committee (MPC) meets this week and will make their next announcements on interest rates on 3 November. The Bank has made increases of half a percentage point or less, on the seven occasions Bank Rate has been increased since last December, to reach its current level of 2.25%. Some commentators are predicting a full percentage point increase to 3.25%, while others think a 0.75 percentage point increase to 3% is a feasible outcome.

FCA’s plan to tackle greenwashing

The Financial Conduct Authority (FCA) has proposed a package of new measures aimed at protecting consumers and improving trust in sustainable investment products, by clamping down on greenwashing. The measures include introducing investment product sustainability labels to give consumers the confidence to understand products, as well as restrictions on how terms like ‘green,’ ‘sustainable’ and ‘ESG’ can be used, and to eradicate exaggerated, misleading or unsubstantiated claims about ESG credentials. Other plans include disclosing investments that a consumer may not expect to be held in the product.

Sacha Sadan, FCA’s Director of Environment Social and Governance, commented, “Greenwashing misleads consumers and erodes trust in all ESG products. Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector. This supports investment in solutions to some of the world’s biggest ESG challenges. This places the UK at the forefront of sustainable investment internationally. We are raising the bar by setting robust regulatory standards to protect consumers in line with our wider FCA strategy.” 

Lost pension values climbing

Data released last week by the Pension Policy Institute (PPI) has highlighted that the value of lost pension pots has risen by £7bn (37%) over the last four years, meaning the total value of lost pensions has now topped £26.6bn. In addition, the number of pension pots considered as lost has increased by 75% over the last four years.

One key finding has shown that high unemployment levels prompted by the pandemic, combined with automatic enrolment, mean an especially large number of people may have left jobs with pension schemes, creating a wave of deferred pots which may become lost.

Director of Policy, Long‑Term Savings and Protection at the Association of British Insurers (ABI), Yvonne Braun said that people are “missing out on money that can make a real difference to their quality of life in retirement. It’s time to pay your pension some attention and use the resources available to track down any lost pots.”

Markets

UK stock markets benefited from a Halloween rebound at the end of October, with the FTSE 100 closing the month at a five-week high, buoyed by gains across Britain’s high street banks, amid expectations of an imminent Bank Rate rise.

London-listed mining giants soared on Tuesday amid hopes that China was looking at a plan for the unwinding of its current zero-COVID strategy. By the end of the day, the FTSE 100 closed at 7,186.16, a 1.3% rise, after briefly peaking at 7,221, higher than before the ‘mini budget’ in late September. The FTSE 250 ended up 1.71% at 18,195.90.

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 (2 November 2022)

Residential Market Review – October 2022

Mortgage turmoil shakes housing market

A turbulent economic and political month has dramatically altered the outlook for the UK housing market.

The government’s ‘mini-budget’, announced on 23rd September, caused interest rate expectations to soar, which led to lenders rapidly withdrawing products. A third of mortgage deals disappeared overnight on 27th September; within a fortnight, 43% fewer products were available, according to MoneyFacts.

With the majority of the ‘mini-budget’ measures now shelved, analysts expect some buyers will delay their purchase in the hope of falling interest rates. If rates do hit the current expected levels, however, the budgets of those looking to buy could be significantly impacted.

Prior to the market turmoil, data released for sales activity in August had been positive, with 114,000 transactions recorded, according to HM Revenue and Customs. This is roughly in line with the 2017–2019 average; indeed, forward indicators for September had suggested sales agreed (12%) and mortgage approvals (14%) would also be above pre-pandemic levels.

Analysts agree that activity is likely to fall sharply in October. Buyer caution could quickly shift the balance of supply and demand over the next few weeks if uncertainty in the mortgage market endures.

Stamp Duty changes

Home movers in the lower price brackets in England and Northern Ireland look set to save up to £2,500 following the Stamp Duty changes announced in the government’s ‘mini-budget’.

The measure, one of the few to have survived the new Chancellor’s statement on 17th October, increases the residential nil-rate threshold from £125,000 to £250,000.

For First-Time Buyers (FTBs), the nil-rate threshold has risen from £300,000 to £425,000. The maximum property price to be eligible for First Time Buyers’ Relief is now £625,000.

The government describes the measure as part of its commitment to support homeownership and promote mobility in the housing market. Announcing the measure, former Chancellor Kwasi Kwarteng noted, “Cuts to Stamp Duty will get the housing market moving and support first-time buyers to put down roots.”

Scottish tenants protected by rent freeze

New legislation passed by the Scottish Parliament has frozen most rents until April 2023 in response to soaring housing costs and cost-of-living concerns.

The Cost of Living (Tenant Protection) (Scotland) Bill, which was fast-tracked through the Scottish parliament’s scrutiny process, gives ministers temporary powers to cap private and social rents. Almost four in ten households currently rent their home in Scotland.

First minister, Nicola Sturgeon, has described the cost-of-living crisis as a “humanitarian emergency” that “poses a danger not just to livelihoods but to lives”.

Exceptions to the rent freeze are allowed where a landlord faces increased property costs, mortgage interest payments and some insurance costs. Evictions too will only be allowed under certain circumstances.

All details are correct at the time of writing (20 September 2022)

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.