UK house price growth unexpectedly slows to seven-month low – Nationwide

LONDON (Reuters) – House prices in Britain rose at the slowest pace in seven months in March, mortgage lender Nationwide said on Thursday, adding to signs of fading momentum in the market.

Houses are seen in London, Britain January 19, 2017. REUTERS/Stefan Wermuth

House prices rose 2.1 percent in the year to March, weaker than all forecasts in a Reuters poll of economists that had pointed to growth of 2.6 percent and slowing from a 2.2 percent increase in February.

Prices fell on the month by 0.2 percent, following a 0.4 percent drop in February – again undercutting all forecasts in the Reuters poll that had pointed to growth of 0.2 percent.

Britain’s housing market has been hit by a squeeze on household incomes caused by higher inflation after the Brexit vote in 2016 pushed down the value of the pound. Weak wage growth has added to the strain on many households while the overall economy has slowed.

“Housing market activity is expected to remain lacklustre as the extended squeeze on consumer purchasing power only gradually eases, confidence is fragile and appreciable caution persists over engaging in major transactions,” Howard Archer, economist at the EY ITEM Club, said.

“Potential house buyers also look highly likely to face further interest rate hikes over the coming months.”

Economists polled by Reuters expect the Bank of England to raise interest rates again in May to a new post-financial crisis high of 0.75 percent. [BOE/INT]

Nationwide said it expected house prices would be broadly flat over 2018, with a marginal gain of around 1 percent over the year as a whole.

Earlier this month, rival mortgage lender Halifax said house prices increased at their slowest annual pace in almost five years during February.

The Bank of England is due to publish mortgage approval and bank lending data for February at 0830 GMT.

Reporting by Andy Bruce; Editing by Susan Fenton

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UK consumers turn more confident in March – GfK

LONDON (Reuters) – Consumers in Britain were their most confident in 10 months in March, according to a survey which suggested that they took comfort from a fall in inflation and this month’s Brexit transition deal.

Shoppers browse for shoes during the Boxing Day sales at Selfridges in London, Britain December 26, 2017. REUTERS/Mary Turner

The headline gauge of consumer confidence, compiled by market research firm GfK for the European Commission, rose to -7 from -10 in February.

The median forecast in a Reuters poll of economists had pointed to another reading of -10.

“The prospect of wage rises finally outstripping declining inflation, high levels of employment with low-level interest rates, and finally some movement on the Brexit front appear to have boosted our spirits,” Joe Staton, head of experience innovation UK at GfK, said in a statement.

Prime Minister Theresa May this month secured an outline deal to keep Britain’s access to the European Union’s single market unchanged for 21 months after Brexit in March next year.

That political breakthrough was accompanied by economic data that showed a pickup in the pace of wage growth and inflation continuing its fall, having jumped after the Brexit vote.

However, GfK’s consumer confidence measure remained in negative territory, where it has been since early 2016, and another survey published on Thursday found households turned a bit more pessimistic in March.

Opinion polling firm YouGov said its index edged down one point to 107.7, the first fall since November, although households reported an improvement in their finances.

Separately on Thursday, the Confederation of British Industry, an employers group, said growth in Britain’s private sector slowed in the first three months of the year.

The survey of 650 firms showed the balance of companies reporting a rise in output at +8 percent, down from +20 percent in the three months to February, but growth was expected to pick up in the second quarter, the CBI said.

The Bank of England said last week it expected heavy snowfall in February and March meant overall economic growth would a bit slower than it had previously forecast.

Reporting by William Schomberg, editing by Alistair Smout

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UK housing market slows in February as mortgage approvals slide

LONDON (Reuters) – Britain’s housing market slowed in February as lenders approved fewer mortgages than expected, Bank of England figures showed on Thursday.

A row of houses are seen in London, Britain June 3, 2015. British house prices rose at their slowest annual rate in nearly two years in May, as growth continued to moderate after double-digit increases in the middle of 2014, figures from mortgage lender Nationwide showed on Wednesday. REUTERS/Suzanne Plunkett

Britain’s economy grew more slowly on an annual basis than all other G7 countries in the final three months of last year, after consumers were hurt by higher inflation caused by the pound’s fall after the Brexit vote in June 2016.

The housing market has also been sluggish – especially in London and surrounding areas – and earlier on Thursday mortgage lender Nationwide said annual house price growth cooled to a seven-month low in March.

The BoE said the number of mortgages approved for house purchase fell to 63,910 in February from 67,110 in January, below economists’ forecasts of a smaller drop to 66,000 in a Reuters poll.

The central bank raised rates for the first time since 2007 in November, reversing a cut made in August 2016, and last month said rates would probably need to rise sooner and by slightly more than it had thought before.

Economists polled by Reuters expect the BoE to raise rates to a new post-financial crisis high of 0.75 percent from 0.5 percent by May.

Figures earlier this week from industry group UK Finance showed the number of mortgages approved by British banks during February fell by 11 percent compared with the same month last year after rising for the first time in four months in January.

In November British finance minister Philip Hammond cut a tax on property purchases for first-time buyers in an attempt to help younger people get into the property market.

While the housing market has slowed over the last year, there were tentative signs that the mood among consumers brightened a little in early 2018.

The BoE data showed the growth rate in unsecured consumer lending picked up slightly to 9.4 percent in the year to February from January’s 9.3 percent.

And earlier on Thursday market research firm GfK said consumer confidence in Britain increased sharply in March.

Consumer lending in cash terms increased by 1.647 billion pounds, topping all predictions in a Reuters poll that had pointed to a rise of 1.4 billion pounds.

Consumer credit growth has been slowing gradually since it peaked at nearly 11 percent in January 2016.

The BoE has played down any suggestion of a debt bubble, though it has acknowledged pockets of risk and required banks to set aside more money against the risk of bad loans.

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UK watchdog considers ban on some pension transfer charges

LONDON (Reuters) – Britain’s markets watchdog is considering banning certain types of charges for pension transfers and is proposing that advisers gain investment qualifications, it said on Monday, following concern that policyholders are being given bad advice.

FILE PHOTO: The logo of the Financial Conduct Authority (FCA) is seen at the agency’s headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren

Following a change in rules three years ago, British pension holders can give up their pension pots at age 55 or above for a lump sum or another investment.

However, the Financial Conduct Authority has come under fire for slowness in preventing “vulture” advisers from persuading steelworkers to give up their “gold-plated” defined benefit, or final salary pension schemes, which give a fixed income for life, for risky investments with high fees.

The FCA said it was seeking views on banning “contingent charging”, in which consumers only pay for the advice if they transfer their pensions.

For firms which only advise on pension transfers, this charging model “has the greatest potential to incentivise unsuitable advice, as such a firm would not be viable if it did not recommend a minimum number of transfers each year”, the FCA said in a consultation paper on improving the quality of pension transfer advice.

The FCA should ban the charges, said Frank Field, chair of the British parliament’s work and pensions committee.

“As pension transfers surge to unprecedented volumes, the disturbing amount of unsuitable advice in this area poses a clear and present threat to the nation’s pension savings,” he said.

Most consumers would be best advised to keep their defined benefit pension schemes, the FCA said, adding “there is potential for significant consumer harm if unsuitable advice is given to consumers who are considering giving up these benefits”.

The FCA also said it was proposing that pension transfer advisers obtain an investment advice qualification.

Reporting by Carolyn Cohn; Editing by Hugh Lawson

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Bank of England sees modest pick-up in pay settlements

LONDON (Reuters) – A Bank of England survey of companies published on Wednesday showed employers increased slightly the pace of pay increases for staff in early 2018 and their hiring plans pointed to modest growth in headcount.

FILE PHOTO: Workers emerge from Bank underground station with the Bank of England (L) and Royal Exchange building (R) seen in the City of London financial district, London, Britain, January 25, 2018. REUTERS/Toby Melville/File Photo

“Growth in total labour costs remained modest, though average pay settlements this year were a little higher than in 2017 for many contacts, at between 2.5 percent and 3.5 percent,” the BoE said.

The survey was considered by policymakers at their March meeting when they kept interest rates unchanged at 0.50 percent.

The BoE has said it expects pay growth to pick up speed this year, one of the main reasons it raised interest rates in November and has signalled further increases ahead.

Writing by William Schomberg; editing by Kate Holton

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Bank of England considered bank capital buffer hike but waiting to watch risks

LONDON (Reuters) – The Bank of England said it considered this month increasing the amount of money banks must set aside to counter their risks as lending in Britain grows, but it held off taking a decision until June.

A man wears a bowler hat outside the Bank of England in the City of London, Britain, November 2, 2017. REUTERS/Toby Melville

The BoE said on Tuesday its Financial Policy Committee, which oversees risks to the economy from the banking system, had seen arguments for setting the so-called countercyclical capital buffer (CCyB) a little above its current level of 1 percent of a bank’s risk-weighted assets.

“Risks had increased since the Committee first judged that a 1 percent UK CCyB rate was appropriate, in Q1 2016,” the BoE said in a series of minutes from the FPC’s meeting on March 12.

Although British economic growth slowed last year following the 2016 vote to leave the European Union, it held up better than the BoE and most economists had expected. A Brexit transition deal struck by London and Brussels earlier this month has further eased short-term concerns about growth.

The FPC said on Tuesday that risks of a Brexit hit to Britain’s huge financial services industry had eased since its previous meeting in November.

On the possibility of raising the CCyB, the FPC said it had to be forward-looking and “waiting for a more marked evolution in domestic risks before acting could result in a need to consider sharper adjustments to the UK CcyB rate, which would likely carry larger economic costs”, the minutes said.

A “measured increase” in the first quarter of 2018 could be accommodated by banks without a need to tighten credit conditions and would not have been a shock, they said.

But the FPC also listed arguments for keeping the CCyB at 1 percent, including modest growth in lending, and it said signs of intensifying risk appetite would need to persist to justify an increase in the CCyB.

More targeted options could be appropriate and the FPC stressed its preference of raising the CCyB rate only gradually.

“At this stage, it might be beneficial to note the probable direction for the UK CCyB rate, given how risk-taking had developed, and to observe the evolution of risks over the coming months in considering whether a rise was warranted,” the minutes said.

The central bank also noted there had been an increase in lending close to the riskiest end of the mortgage market.

In 2014, the BoE limited lenders’ ability to issue mortgages that were worth more than 4.5 times a borrower’s annual income.

The share of lending just below the highest loan-to-value ratio had recovered from troughs seen during the global financial crisis although it remained significantly below pre-crisis levels, the BoE said.

Reporting by William Schomberg and Andrew MacAskill; editing by David Stamp

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