Tough times – with some hope on the horizon?
It is with great dismay and despondency that I heard of the further interest rate rise to 4.5% on Thursday. Reckless and again unnecessary came into my thought process and further confirmed my resolution that this country is being poorly led and totally misguided by the Bank of England – BoE.
Raising interest rates is inflammatory as it increases household expenditure and lending costs. The BoE thought process is that increasing interest rates controls inflation by stopping those with mortgages spending the excess monthly income that they don’t currently have due to the cost of living crisis? It is about as much use as increasing taxes to fuel an economy – except the only beneficiaries are savers and the banks themselves.
The new global inflationary figure sits at about 10 – 11% and not the pre pandemic ideal of 4%. The metrics for reading economic inflation are out of date and over 30 years old and it is arguable that they never really worked. Increasing interest rates will only further stifle expenditure and business and mortgage lending and therefore economic growth, at a time when the economy needs to grow and not rescind.
Those of us who have experienced the ups and downs of the conveyancing industry over the last three decades will appreciate that if the property market isn’t buoyant, then the overall UK economy is in trouble. Difficulties, including falling house prices and rising interest rates, leading to low transaction numbers due to uncertainty and difficult borrowing conditions, are all a precursor to recession.
We have all been looking for positives past the “Truss Debacle” in October. Since this time conveyancers have endured a fall in transaction numbers to pre-2019 levels and in some cases a 20 – 30% reduction in new transactional instruction levels. Transaction attrition – cancellation levels have been at an unprecedented high over the course of the last six months. Many conveyancing practices have or are looking at reducing their staffing numbers, reacting and recognising perhaps that the current situation is not likely to get better anytime soon, as confirmed again with further unnecessary interest rate rises this month.
Perhaps the question we need to ask is: If you were looking to buy or move house, is now a good time to do so? Interest rates are rising – with no end in sight, as there is no justification for this course of action, as detailed above – house prices are falling with more properties on the market than at any time in the last three years – mortgage lending is at its highest since the 1980s – 16% on an average house value back then equates to 4-5% of house values today – are we heading for recession? I think I’ll wait and see what happens this time next year is perhaps what a lot of potential movers are thinking at the moment?
Is there a silver lining I hear you ask?
Lenders need to lend and it was heartening last week to see the Skipton Building Society offering 100% mortgages for FTBs with good rental history – hopefully this will take some of the sting away from the end of the government Help to Buy scheme.
Zoopla are optimistic that residential transaction numbers will still reach one million this year, which is some way short of the booming last three years, but more that the deadening figures of 2008.
There are now a lot more properties on the market and sellers appear prepared to negotiate downward on purchase prices – it’s definitely a buyers’ market.
Whilst conveyancers have moved from having access to too much work to not enough, it does give us all time to adjust the sails and to significantly reduce those transaction timelines.
Hopefully the government will intervene very soon, as they have an election to win in May 2024 and so they need a strong economy – and therefore a strong housing market – and quickly. Watch this space but batten down the hatches in the meantime – “Storm BoE Bailey” is raging out of control and doesn’t know where its heading at the moment!!
May 15, 2023