Mortgage market volatility, New York's recovery, and how will consumers react to rising prices?
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
Staying the course
The Ukraine-Russia conflict adds considerable uncertainty to the path of interest rates. Consumer prices may accelerate as a result and central banks are left choosing between letting deep-set inflation run its course or dampening spending at a critical moment for the global economy - see Wednesday's note.
The limited evidence we have so far suggests the Bank of England plans to stay the course. During a trip to Southampton yesterday BoE chief economist Huw Pill said inflation was "uncomfortably high," may accelerate further on the back of energy prices and reiterated that the Bank would do what it can to slow rising prices "in a measured way." The Governor Andrew Bailey made similar comments during his Treasury Select Committee hearing on Wednesday, though hinted the market may be getting carried away in expecting the base rate to hit 2% by the end of the year.
Likewise, Loretta Mester, president of the Federal Reserve Bank of Cleveland, said in a speech yesterday that it "will be appropriate" for the Fed to push on with a hike in March, though added that the evolving situation in Ukraine could dictate the pace of further tightening.
Mortgages
The best mortgage rates "have almost doubled in just five months", this morning's Telegraph reports.
Mortgage rates fell to incredibly competitive levels during the pandemic. Whilst the movement we've seen in recent months looks like an aggressive repricing it effectively puts rates back to the level we'd usually expect relative to the base rate.
Volatility is increasing, however. A number of the largest high street lenders have withdrawn their most attractive products during the past ten days - six in the space of four days, according to the report. Hina Bhuda of Knight Frank Finance tells the paper that it's hard to say where rates will be six months from now before adding:
"What is for certain is that banks are currently withdrawing the best mortgages on a daily basis and borrowers aren't being given much time to consider their options."
Consumer spending
Consumer spending has so far remained resilient, though the latest monthly index compiled by Gfk reveals a sharp dip in confidence, taking the reading to its lowest level since January last year - about the time of the third lockdown.
Various measures suggest there's been a sharp rebound following the disruption of Omicron - see the latest ONS figures and the PMI index we discussed on Wednesday. So how will consumers fare from here?
We tackle the question in a timely retail edition of our Intelligence Talks podcast, out this morning. Anna is joined by Knight Frank’s head of retail research Stephen Springham and retail analyst Emma Barnstable, who both err on the side of optimism. Rising prices will be painful but various tailwinds exist, including the “accidental savings” built up by consumers over the pandemic, sloshing around the economy and many are keen and predisposed to spending after being stuck at home. Knight Frank is forecasting UK retail sales growth of 3.5% this year.
Listen here, or wherever you get your podcasts.
NYC
The urban exodus experienced at the start of the Covid-19 crisis is clearly in reverse in New York. Kate Everett-Allen charts the recovery:
The number of Manhattan properties which saw contracts signed in October 2021 has risen by more than 43% to 1,203 compared to the same month in 2020, and the number of listings at 1,777, sit significantly below their five-year average.
Prices at the prime end of the market have been falling for nearly four years, but a return to growth is being witnessed, with expectations that annual prime price growth will reach 5% in 2022, this would represent Manhattan’s highest rate of growth for seven years.
See the analysis for more.
In other news...
Oliver Knight on why the success of levelling up will hinge on regional BTR.
Kate Everett-Allen takes a deep dive into the Italian housing market.
Elsewhere - IKEA opens first high street store in UK, eyeing London spending spree (Reuters), UK sees fastest wage rises in sectors most reliant on EU workers (Reuters), and finally, the Wall St verdict on the Ukraine crisis (Bloomberg).