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Archive for the ‘Consumer spending’ Category
Wednesday, June 29th, 2011
Marginal rise in home loan approvals underlines market’s weakness and represents 7% fall year-on-year, latest Bank of England figures show
The number of loans approved for house purchase edged up by 1% to 45,940 in May after dipping to a four-month low of 45,447 in April, according to Bank of England figures.
Some economists said it was notable that mortgage approvals in May were still below March’s level of 47,345 loan approvals, because a rebound was expected following subdued April figures caused by the extra bank holiday for the royal wedding and a late Easter. The May figure also represents a 7% year-on-year fall.
The Bank of England also reported that net mortgage lending rose £1.1bn in May, up from £1bn in April but low compared to long-term norms. This is the consequence of both current low mortgage activity and a desire of a significant number of homeowners to reduce their debt by paying off more of their mortgages.
The number of approvals for remortgaging also increased only marginally, by nearly 2% to 20,491, as the threat of an imminent rise in interest rates receded.
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “A rise in the number of approvals for house purchase was always likely after the long bank holiday that was April, but the fact that there was only a slight increase in May underlines just how weak the mortgage market still is.
“A raft of insolvencies data over the past week and reports confirming that even the slightest rise in rates would tip many homeowners over the edge add to the feeling that a rise in bank rate is now unlikely to happen this year. Consequently, the remortgage market looks set to remain fairly flat as people bank on rates staying put.
“The UK economy is still very much in intensive care while the property market, with the exception of London, is falling further into the red. Throw in the ongoing drama that is Greece and it’s no surprise that prospective buyers are ultra-cautious.”
The Bank of England reported that unsecured consumer credit rose by just £200m in May, while credit card lending rose by £34m – the lowest increase for 13 months.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “Consumer appetite for taking on new borrowing clearly remains limited while there is also an ongoing desire of many consumers to reduce their debt.
“Consumer desire to get a tighter grip on their finances is a reflection of current very low consumer confidence and is the consequence of an uncertain and somewhat worrying longer-term outlook for the economy and jobs as the major fiscal squeeze increasingly kicks in.
“Still significant concern that interest rates could start rising before long is a further incentive for consumers to try to limit their borrowing and improve their finances. Even a small rise in interest rates could cause trouble for many people.”
Posted in Borrowing & debt, Business, Consumer spending, Credit cards, Economics, guardian.co.uk, House News, Housing market, Money, Mortgage lending figures, Mortgage rates, Mortgages, News, Property, UK news | Comments Closed
Monday, May 9th, 2011
High street gets much-needed boost after poor March sales, says BRC, while Rics housing survey finds signs of an upturn
The royal wedding, a late Easter and a sunny April wooed consumers back to the shops last month and provided a boost to activity in the high street, the British Retail Consortium said today.
In its monthly health check of spending, the BRC said trading picked up significantly after a weak March, when sales posted their sharpest decline since the survey was established in the mid-1990s.
Overall, the value of retail sales according to the BRC/KPMG monitor were up 6.9% on April 2010, and by 5.2% on a like-for-like basis, which strips out the impact of retailers adding to their floorspace over the past year.
Estate agents also reported that the start to the traditional spring buying season had prompted an increase both in the number of properties on the market and those looking to purchase a home, although prices continued to fall.
Stephen Robertson, BRC director general, said: “Easter and the royal wedding bank holiday provided a badly needed boost to many retailers during April. Food sales were strong leading up to Good Friday, suggesting most families prioritised their spending on the Easter celebrations. The hottest April since records began got people out spending on summer clothing and footwear.
“Considered together, the results for March and April largely cancel each other out and the overall trend is flat.” Helen Dickinson, head of retail at KPMG, said: “As expected, the combination of a late Easter, dry and sunny weather, and the royal wedding feelgood factor, has provided a very welcome respite in a challenging retail trading environment. Most sectors showed a significant uplift on the prior year and on recent months, with food, drink, clothing and footwear leading the way.
“The question now is whether this is indicative of a corner having been turned from the longer term downward trend in demand. Given the three-month average is still heading in a downward direction with 1.8% total and 0.1% sales growth for February to April compared to 2.7% total and 0.8% for the three months to January, this is unlikely to be case. Hence, the majority of retailers remain cautious about the outlook for the remainder of the year.”
The monthly report on the housing market from the Royal Institution of Chartered Surveyors showed a balance of +18 percentage points of estate agents reporting a rise rather than a fall in new instructions to sell properties, up from +4 points in March. It said there were also signs of demand steadying, with as many surveyors reporting an increase in new buyer inquiries as reporting a fall, the first time the balance has not been negative in 10 months.
Rics’ housing spokesman, Michael Newey, said: “The return of sellers to the market is positive but activity still remains subdued and it is difficult to see it picking up materially over the coming months. Although there are signs that some lenders may be reducing their grip on the purse strings, in particular with mortgages aimed at first time buyers, there is still a long way to go before lending levels increase enough to have any real impact. Economic uncertainty may also continue to weigh on sentiment for a while to come.”
Rics said fine weather led to more viewings by potential buyers in some parts of the UK but surveyors say a lack of mortgage finance still hinders many, with only the cash-rich able to take advantage of the market. After yesterday’s Halifax house price survey, which showed the cost of a home fell by 1.4% last month, the Rics said a balance of + 21% of surveyors reported prices fell rather than rose in April, the strongest figure since June.
Martin Ellis, housing economist, said: “Weak confidence amongst households, partly due to uncertainty over the economic outlook, is constraining housing demand and resulting in some downward movement in prices. Signs of a modest tightening in housing market conditions, a relatively low burden of servicing mortgage debt and an increase in the number of people in employment are all likely to be providing support for house prices, curbing the pace of decline.”
Posted in Business, Consumer spending, Economics, Editorial, House News, Housing market, Money, Property, Retail industry, The Guardian | Comments Closed
Tuesday, April 12th, 2011
• BRC-KPMG retail sales monitor shows biggest fall in total sales since survey began in 1995
• RICS figures show house prices outside London are continuing to fall
Britain’s retailers are enduring the toughest trading conditions for at least a decade and a half, as consumer spending wilts in the face of higher inflation and the first drop in personal spending power since the slump of the early 1980s.
Today’s monthly healthcheck from the British Retail Consortium (BRC) of activity in brick and mortar stores and on the internet found an across-the-board weakness in consumer spending that left takings down on a year earlier.
City analysts are braced for fresh evidence of upward pressure on the cost of living with the release of the latest Office for National Statistics data today. Financial markets are expecting the annual inflation rate as measured by the consumer prices index to nudge closer to 5%, adding to the Bank of England’s dilemma over whether to raise interest rates at a time when the economy is weak.
Stephen Robertson, director general of the BRC, said: “The next interest rate decision is a difficult balancing act for the Bank but, for now, supporting our weak economy must be the priority. Inflation is coming mainly from temporary and external price shocks – VAT, world commodity prices and the weak pound – not wage or consumer-driven increases. Increasing interest rates would do more harm than good.”
The BRC data comes in the wake of profit warnings from high street names ranging from Dixons to Mothercare, Carpetright, Halfords, HMV and the Argos owner Home Retail Group. The former Asda boss Andy Bond has warned that retailers are facing a two-year high street recession as consumer confidence and household incomes come under increasing pressure.
The BRC-KPMG retail sales monitor showed that the total value of retail sales last month was 1.9% lower than in March 2010, but down 3.5% when the data was adjusted for an increase in floor space over the past 12 months.
“This is the worst drop in total sales since we first collected these figures in 1995,” Robertson said. “Non-food retailers were particularly hard hit. This is strong evidence of the pressure customers and traders are under. This year’s later Easter is a factor but this fall goes way beyond anything explained by that alone.
“Uncomfortably high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for 30 years. Mounting fuel and utility costs, falling house prices, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to. These pressures aren’t going away and the arrival of higher national insurance is likely to compound them in the immediate future.”
A sector-by-sector breakdown of trading conditions found that spending on clothing was down on a year earlier, food sales were flat, stores selling electrical goods had a “challenging” month, book sales were down and many computer games stores were disappointed by sales of the new Nintendo DSi 3D. The BRC said that online sales were also affected, with the growth rate in internet retailing halving to 7.5% between March 2010 and March 2011.
Helen Dickinson, head of retail at the accountancy firm KPMG, said: “We have seen an emergence of new, lower spending patterns since the middle of January, which are currently continuing to trend downwards. Many retailers will not be able to sustain this ongoing weakness in demand beyond the short term and are hoping for some good news around the extended bank holiday period and a feelgood factor driven by the royal wedding.
“However, as disposable income continues to fall, without reducing saving or increasing borrowing – which would oppose current trends – this will not be possible.”
A separate report today from Britain’s estate agents suggested little prospect of the traditional spring surge in the housing market. The Royal Institution of Chartered Surveyors (RICS) said that activity was flat, demand for new property had fallen and prices were continuing to edge downwards. Nationally, the number of firms reporting falling prices exceeded those registering price increases by a margin of 23 percentage points, slightly lower than the balance of +26% in February.
According to the RICS, the general fall in house prices over the past three months was in the range of 0-2%. London was the only part of the country to report a rise in prices, and also bucked the trend in terms of activity.
Ian Perry, RICS housing spokesman, said: “The rather negative outlook for property prices across the UK seems to better reflect the general economy than the microclimate of London. The low level of buyer interest in many parts of the UK continues to impact on the market, resulting in some downward pressure on prices. With the prospect of forthcoming interest rate rises and continued shortage of mortgage funding, it seems that overall recovery for the national housing market is still some way off.”
Posted in Business, Carpetright, Consumer spending, Dixons Retail, Economic growth (GDP), Economics, Halfords, HMV, Home Retail, House News, House prices, Inflation, Interest rates, Money, Mothercare, National insurance, News, Property, Retail industry, Tax, The Guardian | Comments Closed
Monday, April 4th, 2011
Borrowers cut their mortgage debt by £7bn between October and December, taking the total repayment for the year to £24bn
Households paid off their mortgages at a record rate in the final quarter of last year, according to Bank of England figures, reducing Britain’s debt mountain but slowing the prospects of an early economic recovery.
Borrowers reduced their outstanding mortgage debt by £7bn between October and December, taking the total repayment for the year to £24bn. The figures mark a dramatic turnaround from the housing boom years, when equity withdrawal was pumping about £50bn a year into the economy.
Equity withdrawal was typically used to fund new conservatories, cars and holidays in a borrowing binge that saw Britain’s households turn their homes into cash machines. But equity withdrawal went negative in mid-2008 and has been increasing in scale since.
At its peak, the money added on to existing mortgage loans was equal to nearly 9% of total personal spending. But the Bank of England said that households are now spending the equivalent of 2.7% of their income on paying the debt back.
In other housing market recessions, such as in the early 1990s, there were also periods of debt repayment but typically it was less than 1% of personal post-tax income. But since September 2008, it has been running at 1.5% to 2.8% of income.
Some are hailing the figures as evidence of a new-found prudence among Britain’s borrowers, but others say it is simply because the door has closed to people wanting to take on more debt. What is also emerging is a divided Britain where households in work and with tracker mortgages are paying down debt, while those losing jobs are pushing up default figures.
Ray Boulger of mortgage broker John Charcol said: “It is now much more difficult to get further advances on your home and lenders are more selective about what it will be used for. If it really is for home improvement, then that’s generally not a problem but if it’s for other things they will be more restrictive.
“Crucially, lenders used to be willing to advance extra sums which would take the mortgage up to a maximum of 90% of the property value, but now they are unlikely to go over 75%. They might also cap the total sum at £25,000.”
Many households are choosing to repay mortgage debt rather than build up savings because the rate of interest paid on deposit accounts is at historically low levels. Richard Sexton of chartered surveyors e.surv said: “Borrowers realise that with base rates still at a record low the best use of their disposable income is to pay off debt. They certainly aren’t keen to spend. Savings rates are so abysmally low meaning there is simply no incentive for people to tuck money away for a rainy day – it would lose value with inflation so high. People have seen the anticipated interest rate hikes on the horizon and have upped the ante of their repayments to take advantage of the lull before the storm.”
Lloyds Bank recently increased the maximum amount a customer can ‘overpay’ on their mortgage from 10% to 20% of the total amount outstanding in response to demand.
Nicholas Leeming of property search engine Zoopla said: “With a potential interest rate rise round the corner and uncertainty over the future of the economy many people have accelerated their plan to pay off as much as possible before their monthly payments go up and this will continue every month rates are held at 0.5%. Despite the record levels of repayment, lenders are showing little sign of increasing their lending activity. Another year of stagnation will do nothing to benefit the wider economy. With so much money being paid back by borrowers it’s high time lenders injected this cash back into the property market to get the sector moving again.”
But while low interest rates, particularly for those on tracker mortgages, has freed up cash to be repaid, worsening unemployment is forcing others into default. The separate Credit Conditions Survey, published by the Bank of England last week, found that in the first quarter of 2011, mortgage default rates “increased unexpectedly over the previous quarter, and was expected to increase further over the next three months.” Losses on credit cards also worsened and are expect to increase in the coming quarter.
Posted in Borrowing & debt, Business, Consumer spending, Economics, House News, Housing market, Interest rates, Money, Mortgage arrears, Mortgages, News, Property, The Guardian, UK news | Comments Closed
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