With home loans hitting their lowest level for two years, property prices in the UK have lost their momentum. Partly as a result of the stricter mortgage qualification process, introduced with the Mortgage Market Review (MMR) and a cap on the number of mortgages with high loan-to-value ratios, the Bank of England (BoE) reported that mortgage lenders reduced their loan availability to its lowest level since the Lehman Brothers collapse. The ‘sentiment survey’, which measures mortgage availability, dipped to -28.5 in the three months through early September, from Q2’s level of 8.2. This confirms that the demand for home loans “decreased significantly” in the period. Whilst the repercussions of the MMR’s stricter criteria greatly lengthened the application process for borrowers, the survey also showed that the majority of lenders believed that lending will return to its previous levels in the next three months. Meanwhile, the Royal Institution of Chartered Surveyors (RICS) confirmed this trend by reporting that new property buyers fell for a third month in a row in September. They went on to add that in London “caution took a particular toll” as demand here was down for a fifth consecutive month and they expected prices here to continue to dip over the next three months. However, at the same time the majority of RICS respondents still saw prices elsewhere rising, albeit at a subdued level. Simon Rubinsohn, the Chief Economist at RICS, was quoted as saying: “Part of this is down to the Bank of England becoming more vocal about the risks, part of this is down to affordability, part of this is down to the new mortgage rules and part of this is down to expectations of higher interest rates.” The Council of Mortgage Lenders also reported a decline in first-time buyers in August, compared to July, of 4%.
Markets (October) (Data supplied by the Outsourced Marketing Department) October saw the equity markets continue in the volatile fashion they performed in September. The London markets reacted badly to the continuing accountancy issues at Tesco, prolonged economic weakness in the eurozone and the slowing Chinese economy. At one point in mid-October the FTSE100 had fallen to 6,195.9; a drop of 6.5% from its September close, but managed a late rally to end October at 6,546.5 for a loss of only 1.16% on the month. The wider FTSE250 fared a little better closing out at 15,501.73, recording a modest gain of 0.79%, whilst the junior AIM market lost 3.91% to end the month on 720.17. Across the pond the US Treasury confirmed it is ending its quantitative easing programme, as it feels its economy is now on a sound footing. As a result, the Dow Jones index rallied to a record closing level of 17,390.52, for a monthly gain of 2.04%. The Nasdaq also saw gains of 3.06%, finishing October at 4,630.74. Persistent weakness in the eurozone economies and the remaining threat of deflation there saw the Eurostoxx50 lose 4.43% to end at 3,082.92, reversing its recent gains. In Japan the ‘Abenomics’ of massive quantitative easing drove down the Yen and also saw the Nikkei 225 drop by 3.19% to 15,658.20, also reversing the gains achieved in September. Given that pundits now believe UK interest rates will remain low, possibly even into 2016, sterling lost its admirers, losing 1.23% against the US Dollar to $1.60 and a less dramatic 0.78% against the Euro at €1.28. Meanwhile, the US Dollar slipped a similar 0.79% to end at $1.25 against the Euro. As reported elsewhere here, oil has fallen dramatically to only $85.86 a barrel, as measured by the Brent Crude benchmark and economists believe it has further to fall. Gold, the usual safe-haven asset in times of unrest, did not react accordingly, as it lost 2.82% to end the month at $1,172.64 a troy ounce.