Help to Buy closure, ESG and rising interest rates
Making sense of the latest trends in property and economics from around the globe.
3 minutes to read
Help to Buy
Help to Buy supported about 40,000 new home sales in 2021 despite the government narrowing the scheme to just first-time buyers. There remains some uncertainty as to how the closure of the scheme from next March will impact the new homes market, as Anna Ward explored last month.
Deposit Unlock, a scheme devised in collaboration with lenders, the housebuilding industry and insurer Gallagher Re has been gathering steam, and an additional 50 housebuilders will soon join the original 17 founders, according to an update from Gallagher published on Friday. From the lending side, both Newcastle Building Society and Nationwide are signed up, "with other lenders set to join over the summer."
Under the scheme, housebuilders use a percentage of the proceeds of each sale to pay for mortgage insurance for the lender. This provides the lender with free protection allowing them to offer their borrowers competitive mortgage rates at 95% LTV.
Interest rates
The Fed is widely expected to push on with a 0.75% rate hike at its meeting next week, despite a raft of indicators suggesting the economy is softening.
With another bumper hike on the cards in September, the Fed's aggressive approach is heaping pressure on the Bank of England to speed up its own series of rate hikes. The pound has tumbled around 9% against the US dollar so far this year, increasing the cost of imports and adding to inflationary pressures.
That's not to say there aren't good reasons to stay the course. Consumer confidence is at its lowest for almost 50 years and the latest PMI readings suggest growth is the worst it's been in more than a year.
We'll find out the next decision on August 4th. For now, Flora Harley considers how a base rate at 3% might affect the UK housing market.
Retail sales
Despite those awful consumer sentiment readings, retail sales are holding up fairly well.
Retail sales values (excluding fuel) were up +1.7% year-on-year in June, according to official figures. That's despite the comparison to June 2021, when sales values climbed 9% amid the post-lockdown boom.
You can find Stephen Springham's take here. A reflection of some pinch points, he says, but no meltdown. Stephen expects that July will show a month-on-month decline in both volume and value terms, but that might not equal signs of a recession. Consumers are still spending, for the time being.
ESG
The Economist designates this week's cover story to ESG, three letters which it says "have morphed into shorthand for hype and controversy."
The paper claims ESG lumps together a dizzying array of objectives and so provides a poor guide as to how to make the complex trade offs that are inevitable in any society. Ultimately, the paper suggests stripping everything back to the 'E', and measuring only emissions.
Scoring companies by their emissions alone would certainly reveal who the biggest polluters are, which would enable regulators to tighten the screw to meet their emissions targets. Would it get us any closer to a unified carbon pricing system? I looked closely at the prospect in this year's Wealth Report and concluded the politics might just be too hard for now.
In other news...
Rising rents mean no shelter for Americans from inflation storm (FT), lawyers lead the way as million-pound salaries rain down on the City (Sunday Times), and finally, IMMO’s £1bn mission to fix up properties (Times).