Friday property news update
Negative rates and the property market
3 minutes to read
Negative rates?
The Bank of England yesterday said it will work with regulators during the fourth quarter on how they might implement a negative base rate for the first time in the central bank’s history. Economists suggested rising Covid-19 infections and economic headwinds caused by Brexit could prompt a move negative in the new year, although the BOE's policy committee said the recovery had exceeded expectations to date.
A report from the CBI this morning reveals a two-speed jobs market is emerging, with 51% of firms expecting to maintain or increase their permanent recruitment in the next 12 months and 46% planning to either reduce permanent recruitment or not recruit at all. That net positive balance of 5% is down from +56% last year.
The mortgage market
The BOE chose to hold the base rate at 0.1% for the time being, signalling borrowing costs will remain lower for longer. Mortgage rates at lower loan-to-value (LTV) rations have come down further in recent days, though anybody needing finance at 85% LTV and above is facing substantially higher costs than at the outset of the pandemic, according to Knight Frank Finance.
That's because lenders are now grappling with such a large volume of transactions that raising the cost of these mortgages, which are generally used by first time buyers and the self-employed, is the most efficient way of controlling the flow of new applications. Should activity subside materially, we expect the high street lenders to begin competing for business once more, at which point we should see higher LTV mortgages move back in line with the rest of the market.
Lockdowns, vaccines and quarantines
With UK testing systems under pressure and reports of imminent new localised lockdowns, Flora Harley checks in on the data and what it might suggest about the prospect for future restrictions.
Testing capacity, the spread of the virus in young people and hospital capacity will all play a role.
Meanwhile, the travel industry has stepped up its pushback against European governments' prevailing strategy of quarantines for travellers and Pfizer is betting that its coronavirus vaccine candidate will show clear evidence of effectiveness early in its clinical trial.
The global outlook improves
The OECD said the global economy appears to be recovering from the coronavirus slump faster than thought only a few months ago thanks to improving outlooks for China and the United States.
The world economy is now on course to contract 4.5% this year, compared to the 6% contraction that it forecast in June. That's built on the assumption that local outbreaks would continue and would be targeted with local action rather than nationwide lockdowns, the OECD said.
In other news...
Chris Druce brings together all the latest findings from the likes of the RICS, Halifax and Nationwide to provide a comprehensive snapshot of what is happening across the whole of the UK property market. This will be updated to become a live resource for all.
Finally: EU's Barnier still hopes UK trade deal is possible; and the UK sees Brexit progress as Von Der Leyen says deal is possible.