Percentage sales at decade high

Analysis1 suggests that almost seven in ten UK properties for sale, found a buyer in the year to June 2021, the highest rate in a decade.

Regional differences Scotland led the way with 89% of homes finding a buyer, while Yorkshire & the Humber was the second most successful area at 77%. Property hotspots included Falkirk and Sheffield, where 94% and 83% of homes were sold respectively. In contrast, London’s figure of 48% was below the average rate of 53% recorded between 2012 and early 2020.

Demand cools

Recent analysis of conveyancing quotes from comparison site reallymoving suggests that buyer demand is beginning to slow from its March peak, with successive drops between April and May (13%) and May and June (18%). This is likely to ease pressure on prices as we move further into the second half of the year. Rob Houghton, CEO of reallymoving, commented, “With the influence of the Stamp Duty holiday now largely expired alongside early signs that buyer demand is returning to more normal levels, we can expect prices to follow suit and return to a more stable trajectory.”

1Rightmove, 2021

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

Estate planning update

HM Revenue & Customs (HMRC) published its annual statistics on Inheritance Tax (IHT) in late July, revealing that IHT payments in the 2020-21 tax year totalled £5.4bn, up around £0.2bn (almost 4%) on the previous year, when receipts were slightly lower than 2018-19. Typically, more than 20,000 deceased estates a year are subject to an IHT charge.

The figures reveal that there has been a reduction in the number of estates affected in recent years, which HMRC believes is due to the phased introduction of the residence nil-rate band, which can allow the estates of married couples and civil partners to receive a total £1m nil-rate IHT band. A transferable nil-rate also assists this outcome, as it is possible to transfer any unused IHT allowance on death to a surviving spouse.

Estate planning can help to keep an estate out of the clutches of IHT or at least reduce the amount of tax payable, by taking simple steps such as making lifetime gifts, through to more complex trust arrangements. It is a specialist area, particularly with the possibility of a revised IHT regime being introduced, so professional input is advisable.

The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

News in Review

“Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic”

The easing of COVID restrictions has resulted in an economic rebound that has exceeded initial estimates, according to data from the Office for National Statistics (ONS). During Q2, the economy grew by 5.5%, up from the 4.8% forecast earlier this year. This is a result of higher spending since April, when the first lockdown easing permitted outdoor dining, in addition to a significant drop in saving as the economy reopened.

Deputy National Statistician at the ONS, Jonathan Athow, commented, “Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars.”

However, the latest data suggests that growth is beginning to slow, with the July ‘pingdemic’ and current supply chain issues putting the brakes on recovery. The monthly growth figure in July was just 0.1%, a sharp drop from 1.4% in June. This was reflected in the Bank of England’s latest GDP forecast, which revised its predictions for Q3 growth down to 2.1% from a previous forecast of 2.9%.

Furlough ends

On 30 September, the Coronavirus Job Retention Scheme, or furlough scheme, which has helped to pay the wages of 11.6 million workers over the course of the pandemic, finally came to a close. For the estimated one million workers still being supported by the scheme in September, the future is uncertain. Forecasts from the National Institute of Economic and Social Research (NIESR) and Dutch financial services firm, ING, in August, suggested that the unemployment rate will rise following the scheme’s end, with NIESR predicting that it will rise to 5.4% and ING predicting an increase to 5.5%. This is in contrast to the Bank of England’s own predictions, with the central bank stating it believed that unemployment has now peaked and will continue to fall in spite of furlough’s end.

Renewal of other job support schemes

Rishi Sunak used his Conservative Party conference speech on Monday to commit £500m to renew other job support programmes set up during the pandemic. Specifically, the Kickstart Scheme, which subsidises eligible jobs for young people aged 16 to 24 on Universal Credit, will be extended to March 2022 and the Job Entry Targeted Support (JETS) scheme, which helps long-term unemployed people on Universal Credit, will be extended until next September. Further details will be confirmed at the Spending Review on 27 October, when it is presented alongside the Budget. The Chancellor spoke about how the government’s recovery approach focuses on “good work, better skills and higher wages.”

Market news

Some global indices recovered losses on Tuesday, after several large technology firms lost ground on Monday, as concerns intensified over increasing raw material prices adding to inflationary pressures. Markets received a boost as oil prices headed to multi-year highs, following the Organization of the Petroleum Exporting Countries, Russia and their allies’ (OPEC+) decision to continue gradually increasing output. 

Rapid house price growth continues in September

The Stamp Duty holiday ‘taper’ threshold ended on Thursday in England and Northern Ireland, with the nil-rate threshold of £125,000 reinstated for the first time since July 2020. Predictions of a house price slump have not been realised so far, despite the maximum tax savings falling from £15,000 to £2,500 from 30 June. Double-digit house price growth continued into September, with Nationwide house price data calculating that prices had increased by 10% year-on-year.

Those trying to get onto the property ladder continue to face the difficulty of raising enough money for a deposit, with a 20% deposit on the average first-time buyer home now standing at a record 113% of gross income. For those who have raised the funds, there is a silver lining: mortgage rates are currently at record lows, with some lenders introducing mortgage deals under 1%.

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.

LPA overhaul? – consultation launched

During the summer, the Ministry of Justice launched a 12-week consultation into the process of registering and creating a Lasting Power of Attorney (LPA).

A handy component of intergenerational wealth planning, LPAs are legal documents, introduced in 2007 to replace the Enduring Power of Attorney, that allow one person (the ‘donor’) to appoint another (the ‘attorney’) to manage their finances and/or general health and welfare. Questions have arisen in recent years, as to the system’s fitness for purpose. Also, concerns that unscrupulous relatives may be abusing the system to gain access to their elderly victims’ wealth, have arisen.

Time for tech

The Ministry of Justice commented, ‘The number of registered Lasting Powers of Attorney (LPA) has increased drastically in recent years to more than five million, but the process of making one retains many paper-based features that are over 30 years old… The consultation will look at how technology can be used to reform the process of witnessing, improve access and speed up the service.’

With the consultation closing in mid-October, the government intends to publish a response in January 2022.

The value of investments and income from them may go down. You may not get back the original amount invested.

Autumn: a time of change and preparation

As the darker evenings and colder days of autumn approach, our thoughts often turn to hunkering down and preparing for the winter months.

A season traditionally associated with change, preservation and preparation, autumn is a perfect time to get your finances organised before the rush of the festive season and the New Year.

Getting prepared

Autumn is an excellent time to get things done for many reasons, but it is a particularly good time to take stock of our finances. October marks the halfway point of the 2021-22 tax year, making it the perfect time to review your ISA and JISA contributions thus far, in addition to any other tax-related issues. Also take a look at your pension arrangements and check you are adequately protected against any potential financial shocks.

Don’t put it off!

It’s easy to talk about the importance of keeping on top of our finances and then put the task on the back burner. A recent poll1 discovered that Britain is a nation of procrastinators, with 84% of respondents admitting they put off important tasks by either doing nothing, or doing something more enjoyable or completely unrelated, while one fifth procrastinate every single day!

Facing your finances

However, the best way to keep on top of your finances is to deal with them even before you ‘need’ to – especially when it comes to your pension. Shockingly, research2 has found that almost as many people (34%) know the value of their wardrobe contents as those who know the value of their pension pots (38%)! Meanwhile, far more people know the value of their house (58%), their car (55%) and their television (63%).

Clearly, it is in our nature to procrastinate. However, many of us do get stressed when we’re not on top of things. Remember, you don’t have to do it alone – we can help you face your finances and get some of those important jobs ticked off sooner rather than later.

1Micro Biz Mag, 2021

2Aviva, 2021

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Reasons for economic optimism in the autumn months

Over the summer months, forecasting agencies took turns to upgrade their growth projections for developed nations as a succession of strong economic data was released. For example, in its latest assessment, the International Monetary Fund (IMF) increased its combined 2021 growth forecast for advanced economies by half a percentage point, primarily due to the success of vaccine rollouts and government stimulus measures supporting recovery. So, with the arrival of autumn, there are reasons to be optimistic, though future growth prospects are likely to be closely linked to the course the virus takes.

Uncertainties and risks

The IMF assessment did highlight a divergence in fortunes between rich and poor nations due to differing levels of access to vaccines. As a result, an offsetting downgrade across emerging markets and developing economies has resulted in the overall global growth forecast remaining unchanged.

Ongoing concerns surrounding inflation also persist, despite policymakers’ insistence that the recent upward trend in prices will prove to be transient. Furthermore, current levels of government and central bank spending can only be a temporary phenomenon and, when stopped, will certainly have an impact on growth.

Grounds for optimism

While the outlook is therefore expected to remain relatively uncertain, there are grounds for investor optimism. Market fundamentals remain comparatively strong, with earnings growth still being fuelled by pent-up demand as economies reopen, and companies start to invest again as the recovery continues to gather momentum.

Diversification remains vital

There is no question that the world is in a period of immense change, with issues relating to the pandemic, as well as sustainability, fundamentally changing the investment landscape. Some things, however, do not change, like the importance of holding a diversified investment portfolio and the need for expert financial advice. That’s where we come in.

The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.

Robust recovery for housing and mortgage markets

Projections produced by the Intermediary Mortgage Lenders Association (IMLA) suggest gross mortgage lending will reach £285bn this year. This revision, upgraded from a previous forecast of £283bn, points to the housing and mortgage markets’ continued strength in the face of pandemic-related challenges.

A strong housing market has caused a surge in mortgage lending. In the first five months of 2021, lending for house purchase was 87% higher than the same period in 2020 and 51% above the same period in 2019. Buy-to-let lending has also increased, propelled by house purchase transactions.

Peak buying

Housing turnover is expected to remain buoyant into Q3, with an additional 120,000 property transactions. However, after the high levels of market activity during the Stamp Duty holiday, the IMLA expects gross lending to dip in 2022, reducing its forecast from £286bn to £280bn.

Quieter spell to come?

While the Stamp Duty holiday has fuelled rising house prices, a slightly more subdued picture is likely to emerge following the end of the taper (30 September in England and Northern Ireland). This isn’t certain, however: in Scotland, where the Land and Buildings Transaction Tax reduction ended in March, buyer momentum has remained resilient and house prices have continued to rise at pace.

Kate Davies, Executive Director of the IMLA, commented, “With the Stamp Duty holiday soon coming to an end, and the Help to Buy scheme due to conclude in 2023, there is still a need for a coherent, long-term housing strategy from the government that embraces the public as well as the private sectors.”

More deals, lower rates

Separate figures1 show the number of mortgage deals has risen from 4,512 in July to 4,660 in August. At the same time, the average rate for two-year and five-year fixed rate products has fallen to 2.52% and 2.75% respectively.

The best deals aren’t lasting long though. If you’re looking to lock into a low rate, get in touch now and we can find the most suitable mortgage for your circumstances.

1Moneyfacts, 2021

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

Economic Review – September 2021

Upgrade to UK GDP growth

The Office for National Statistics (ONS) has revised UK economic growth for Q2 2021 to 5.5% from an original estimate of 4.8%. The UK’s level of GDP is now 3.3% below where it was pre-pandemic in Q4 2019, revised from the previous estimate of 4.4% below.

Other ONS data indicates a loss of momentum more recently, with the economy growing by 0.1% in July. Although this represents a sixth successive month of growth, the figure was lower than June’s 1.4% rise and below the 0.6% average forecast predicted in a Reuters poll of economists.

July’s slowdown partly reflects an upsurge in COVID cases and the resulting ‘pingdemic’, with ONS saying some businesses complained of staff being unable to attend work due to self-isolation requirements. Additionally, analysts said the slowdown highlighted the impact of supply chain disruptions.

More recent survey data also shows supply chain issues continue to weigh on the recovery. The closely watched IHS Markit/CIPS flash composite Purchasing Managers’ Index (PMI), for instance, fell from 54.8 in August to 54.1 in September. While any reading above 50 does still imply growth, this was a fourth consecutive monthly decline, signalling a loss of momentum across the UK private sector.

IHS Markit’s Chief Business Economist Chris Williamson said, “The survey also points to business activity being increasingly constrained by shortages of materials and labour, most notably in the manufacturing sector but also in some services firms. A lack of staff and components were especially widely cited as causing falls in output within the food, drink and vehicle manufacturing sectors.“

Back to top

BoE raises inflation forecast

The Bank of England (BoE) recently increased its near-term inflation forecast and signalled that the case for a ‘modest‘ tightening of monetary policy over the next few years has ‘strengthened‘.

At a meeting ending on 22 September, the BoE’s Monetary Policy Committee (MPC) voted unanimously to leave interest rates unchanged at the historic low of 0.1% and to maintain its existing economic stimulus programme by a majority of seven votes to two. However, growing concerns with regards to cost pressures were expressed, with the minutes to the meeting stating that, ‘inflation is expected to rise further in the near term, to slightly above 4% in 2021 Q4, owing largely to developments in energy and goods prices.‘

While stressing no immediate action was currently required, the MPC did announce it had dropped previous guidance stating it would not consider tightening monetary policy until the economy had recovered materially from the pandemic. It also stated that recent developments had ‘strengthened‘ the case for ‘modest tightening‘ over the Bank’s forecast period.

Although the MPC minutes again reiterated the Bank’s ‘central expectation’ that current global price pressures will prove ‘transitory,’ the latest data does suggest inflationary pressures have intensified in recent months. Statistics released by ONS, for example, revealed a record monthly jump in the Consumer Prices Index (CPI). In August, this measure of annual inflation rose to 3.2%, up from 2.0% in July and 0.3% higher than the consensus forecast in a Reuters poll of economists.

Furthermore, data from the latest IHS Markit/CIPS PMI suggest inflationary pressures show little sign of abating. Input costs were reported to have increased sharply in September, with businesses attributing the rise to higher wage costs, the impact of supply chain disruption and rising transportation costs; and in response, firms increased their selling prices at the greatest pace on record.

Back to top

Markets: (Data compiled by TOMD)

As the third quarter drew to a close, supply chain concerns and fears of higher inflation, impacted market sentiment. In the UK, London’s indices slipped back at month end, after better-than-expected economic growth data renewed speculation that an interest rate increase could be on the cards. The FTSE 100 ended the month on 7,086.42, a small loss of 0.47%. The FTSE 250 index closed on 23,031.29, a monthly loss of 4.44%. The Junior AIM index closed on 1,243.82.

US stocks moved lower at month end, even after a spending bill was passed to avert a US government shutdown. Investors are bracing for a wind-down in stimulus, amid growing concerns about economic growth. In the US, the Dow Jones ended the month down 4.29% to close on 33,843.92 and the NASDAQ recorded a loss of 5.31%.

In Japan, the Nikkei 225 gained 4.85% in the month, to close on 29,452.66. Led by cyclical stocks, sentiment was boosted by progress in domestic vaccine rollouts, raising hopes for an economic reopening. The Euro Stoxx 50 lost 3.53% in the month to close on 4,048.08.

On the foreign exchanges, sterling closed the month at $1.34 against the US dollar. The euro closed at €1.16 against sterling and at $1.15 against the US dollar.

Oil prices have been rising on the back of the energy crisis in Europe. Analysts believe oil prices will continue to rise amid surging demand. Brent Crude is currently trading at around $78 per barrel, a gain of over 9% on the month. The gold price rose over 2% on the last trading day of the month, after the dollar fell on poor US weekly jobs numbers, but recent declines, driven by expectations the Fed will soon start tapering economic support, kept gold on track for a monthly and quarterly fall. Gold is currently trading at around $1,730 a troy ounce, a loss of around 4.5% over the month.


Index Value
(30/09/21)		   % Movement
(since 31/08/21)
  FTSE 100 7,086.42 0.47%
  FTSE 250 23,031.29 4.44%
  FTSE AIM 1,243.82 3.80%
  EURO STOXX 50 4,048.08 3.53%
  NASDAQ Composite 14,448.58 5.31%
  DOW JONES 33,843.92 4.29%
  NIKKEI 225 29,452.66 4.85%

Back to top

Job vacancies hit record high

ONS data has revealed that job vacancies now stand at an all-time high as employers report the most severe shortage of job candidates on record.

The latest employment statistics show the labour market continues to recover from the pandemic, with the number of people in pay rolled employment rising by a further 241,000 in August. This lifts the total number of employees on company payrolls to 29.1 million, slightly above pre-pandemic levels.

Despite this rise, demand for staff remains high, with the official number of job vacancies passing the one million mark for the first time since records began in 2001. While the end of furlough will inevitably bring some people back into the jobs market, the Confederation of British Industry has warned it will not be a ‘panacea‘ that will ‘magically fill labour supply gaps.’

A survey by the Recruitment and Employment Confederation recently reported the most severe shortage of job candidates on record, and business groups have said the government decision to grant temporary visas to 5,000 HGV drivers and 5,500 poultry workers will have little impact on the situation. Indeed, the British Chambers of Commerce likened the move to ‘throwing a thimble of water on a bonfire.’

Back to top

Retail sales in downward trend

Although retail sales volumes remain above pre-pandemic levels, August’s official data revealed a record fourth consecutive monthly decline, while survey evidence points to a continuation of this trend in September.

According to ONS figures, retail sales fell unexpectedly in August, with volumes 0.9% lower than July. This fall partly reflects a spending switch from supermarkets to restaurants following the removal of hospitality restrictions, while retailers also said supply chain disruption had hit sales. Downward revisions to previous months’ data also mean volumes have now been steadily declining since April’s lockdown easing peak.

Data from the latest Distributive Trades Survey published by the Confederation of British Industry (CBI) also suggests this downturn continued last month with sales growth slowing to a six-month low in September. In addition, the survey reported stock levels relative to expected sales across the distribution sector at a record low.

Commenting on these supply chain difficulties, CBI Principal Economist Ben Jones said, “Low stock adequacy remains a concern across the distribution sector. Respondents to our survey have told us that they do not expect the transport and production issues that are causing these shortages to ease significantly until at least next year and, in some cases, beyond.“

Back to top

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.

Pension savers enticed by ‘risky’ investments

At a time where it is becoming harder to save up adequate sums for retirement, a new study shows that the UK’s low interest rate environment is causing retirees to turn to riskier pension and investment products which could potentially lose them a significant sum.

Risky business

A poll from the Financial Services Compensation Scheme (FSCS), shows that one in five people aged between 55 and 75 have been tempted to invest in riskier products than those they would ordinarily be comfortable with, lured by a higher rate of return. And, surprisingly, less than one in eight had taken financial advice to explore alternative options for making the most of their cash.

“Life-changing” losses

This has resulted in a rising number of people seeking compensation under the FSCS arrangements, said Chief Executive Caroline Rainbird. She continued, “The real danger is that if consumers choose to put money into high-interest pension and investment products that are not FSCS protected, they could lose life-changing sums of money from their retirement pots if the product provider fails.”

Professional advice is key The FSCS survey is yet another example of research vividly highlighting the importance of seeking professional financial advice before investing in little-known products. Advice helps investors explore and understand the risks before taking the plunge and putting their hard-earned money at risk. Whether you’re approaching retirement or have already retired, we can assist you in maximising your savings whilst minimising the risk.

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

News in Review

‘Against a backdrop of robust goods demand and continuing supply constraints, global inflationary pressures have remained strong’

In a unanimous decision, the Bank of England (BoE) Monetary Policy Committee (MPC) voted to maintain Bank Rate at its record low of 0.1% last week. The vote came as the supply chain crisis, largely driven by an ongoing shortage of heavy goods vehicle (HGV) drivers, shows signs of holding back economic recovery.

This certainly seems to be borne out by the MPC’s latest forecast, which has revised expectations for Q3 growth down by 1% compared with its August projections. The Monetary Policy Summary of September outlined, ‘Since the August MPC meeting, the pace of recovery of global activity has showed signs of slowing. Against a backdrop of robust goods demand and continuing supply constraints, global inflationary pressures have remained strong and there are some signs that cost pressures may prove more persistent.’

The BoE also projected that inflation would reach above 4% in the final quarter of 2021, twice the target level of 2%, ‘owing largely to developments in energy and goods prices.’ Soaring gas prices have so far caused nine suppliers to go bust this year, affecting nearly two million households. However, the MPC maintained its position that many of the factors driving current inflation levels will prove transitory, with inflation falling back to close to the 2% target over the medium term.

Expected to be addressed in the MPC’s November report is the end of the furlough scheme on 30 September and its impact on the labour market and economic recovery.

US economy defies rise in Delta cases

Rising COVID infections across the United States, attributed to the Delta variant of the virus, have not hindered economic recovery, it seems. This is according to the US Federal Reserve, which said the labour market was recovering and high levels of inflation – currently at 5.3% – will prove temporary. It said it may start cutting back on emergency economic support ‘soon,’ but did not specify further.

The country has not been unaffected, however; the Federal Open Market Committee, responsible for setting US monetary policy, commented that increased cases were slowing the pace of recovery.

The US Central Bank remains cautious in its approach, stating that monetary policy and the course of the economy still depended largely ‘on the course of the virus.’

London – an investment powerhouse

Five years after the referendum results set the UK on the path to Brexit, the City of London still holds the lion’s share of the European investment management market, according to a new report from the Investment Association. Its data reveals that London holds a massive 37% market share – larger than Paris (18%), Frankfurt (10%) and Zurich (8%) combined.

The world’s second largest investment centre after the United States, the UK also remains an attractive hub for overseas investment. The report shows that overseas clients accounted for 44% of total assets under management in the UK, or £4.2trn, as of the end of 2020.

In a year marked by economic turmoil, total funds under management for UK investors nevertheless rose by 11% year-on-year to stand at £1.4trn.  

Market update

After a frenetic weekend in the UK, where the spiralling petrol crisis forced the government to suspend competition law to help oil companies work together to deliver fuel to petrol stations, the FTSE 100 held onto gains on Monday, as it benefited from a strong session for major oil stocks. On Tuesday, the FTSE 100 fell back as energy prices continued to soar, with the price of oil reaching a three-year high, stoking concerns that supply chain problems may prompt a slowdown in economic activity.

German election news

Preliminary results show the Social Democratic Party (SPD) claimed a narrow victory in the German election at the weekend. The verdict means that a coalition will need to be formed, with negotiations potentially taking months. With Germany taking over leadership of the G7 in January, the main parties want a new government in place by the end of the year. In the meantime, Angela Merkel will remain Chancellor.

Here to help

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