A national estate agency report expects price rises across the country for residential property of 5.5% in 2015, which would overtake the predictions for London, with a median house price for England and Wales seeing a `4.2% increase to £186,000 compared to Q1 2013’ There has also been a recent increase in the people outside London buying for investment purposes rather than secondary homes with the first quarter of 2014, showing for the first time in a number of years, that ‘an outward flow from London into the South East and further afield’ has been seen. With, `perhaps a recognition that the disparity between London and the regions has peaked’ the Nationwide’s latest house price index showed UK prices have increased by 10.9% in the past 12 months, the biggest rise since June 2007.
The Bank of England have suggested that the FPC (Financial Policy Committee) may have to recommend action within the next couple of months. However, the new rules on mortgage lending MMR (Mortgage Market Review) may help to constrain house prices but, as yet, ‘have not been tested’. The tough affordability tests (officially in force since 26 April) for all mortgage sales have created a glut of headlines about fear within the market as it seems everyone is on red alert.
The B of E is also preparing stress tests to ensure banks could survive a housing crash with a 35% slump to prices and 5% interest rate jump. Eight of the UK’s biggest banks and building societies are likely to be put under the tests to be able to survive sharp drops and sudden rises. The PRA (Prudential Regulation Authority) will be conducting the tests against RBS, Lloyds, Barclays, HSBC, Standard Chartered, Co-Operative, Santander UK and Nationwide Building Society.
The EU is concurrently preparing to outline its details of a co-ordinated programme to make the financial system across the EU resilient enough to withstand market turmoil, with a sample of about 124 banks, including four UK banks, Barclays, HSBC, Lloyds and RBS.
The month started with sterling rising to its highest for nearly five years against the dollar and an almost two year high against the euro. Image and Article credit: Copyright SUF © 2014