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£2,000 loss of income by UK households, energy efficiency plans criticised, buy to let mortgage curb, dramatic fall in house prices, and London property 2023

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UK property news headlines inevitably lead against a background of economic pressures brought about by increasing mortgage interest rates, inflation, and the steadily increasing cost of living.

 

A brief look behind some of those headlines may illustrate just what has caught the eye of those headline writers.

Over £2,000 in income lost this year by the average UK household

On the 10th of January, Landlord Zone homed in on research by the Resolution Foundation (RF) suggesting that the average British family will suffer a cut in income of more than £2,000 this year.

The losses arise from factors such as the combined effects of inflation and the latest increases in the cost of living, the lingering impact of the COVID pandemic, increased government spending in the wake of that pandemic, and the huge increase in energy bills because of the war in Ukraine.

As a result of these unique risks and pressures, the average household in Britain will find its available income reduced by an estimated £2,100 said Landlord Zone.

The country has so far reached only the mid-point of these financial challenges, says the Resolution Foundation, which forecasts a deeper global recession than that following the monetary crisis of 2008.

NRLA: The Government needs to provide clarity on energy efficiency targets in the PRS

The National Residential Landlords Association (NRLA), in a press release on the 9th of January, voiced its concern and displeasure about the government’s apparent reluctance to address its members’ worries about further legislation on energy efficiency standards.

The NRLA explained that it had pleaded for a delay in the introduction of more stringent standards – a minimum requirement for all accommodation in the private rented sector to achieve an Energy Performance Certificate (EC) rating of C or above – until at least 2028 instead of the government’s avowed target of 2025.

Any attempt to impose stricter energy efficiency standards ahead of the ability of landlords to comply with the legislation would be doomed to failure, warned the NRLA, with government plans left “dead in the water”.

BTL mortgage clampdown - more scrutiny demanded

A range of economic and financial challenges are increasing the current risks to lenders, warned a story in Landlord Today on the 12th of January as it relayed requests by the Prudential Regulation Authority (PRA) of the Bank of England for lenders to be more circumspect in its lending to buy to let borrowers.

Greater scrutiny must be exercised by lenders, said the PRU, at a time when financial uncertainties associated with the disruption of supply chains are evident, interest rates are climbing, and the cost of living continues to rise as inflation takes its toll.

These factors have combined to make lending not only to buy to let landlords but also personal unsecured loans, loans for the purchase of commercial property, and loans to small businesses a greater financial risk.

House prices ‘fell through the floor’ since the mini-Budget - by as much as £315k in one area

A story in the Express newspaper on the 11th of January shone a light on the impact that Kwasi Kwarteng’s mini-budget last September seemed to have on house prices.

According to this newspaper story, in one area of England, house prices slumped by a staggering £315,000. In the wake of that mini-budget, claims the Express, the general rate of inflation took off, mortgage interest rates soared, and many of the most competitive mortgage products were withdrawn from the market altogether.

Through developments such as this, the previous two years of record growth in the housing market were undone.

London property market forecast 2023: should you buy a home as the cost of mortgages overtakes renting

London’s Evening Standard newspaper on the 12th of January also commented on the recent decline in house prices in the capital. In the light of that dip in the market, the newspaper posed the question of whether it has now become cheaper to rent than to buy in the capital.

Because the goal of owning a home in London is now out of reach of so many first-time buyers, prices are likely to take a tumble, argued the story – with average prices falling by as much as 12.5%.

At the same time, however, the base lending rate has already been raised by the Bank of England by 0.5% in December to 3.5% and many commentators predict a further hike in interest rates during the first quarter of this year. Furthermore, the cost of servicing mortgage borrowing in London is greater than in other parts of the country.

This all makes for a widening gulf between those who can afford to buy and the majority who will need to continue to rent.