The increase in house prices is at its lowest level since the 2008 financial crash
According to the latest data, the rate of house price increase in the UK is the lowest since the 2008 financial crisis, underlining the impact of interest rate hikes on the real estate market.
Based on information from the property website Rightmove, as of October 7th, the average selling price of new houses increased by 0.5%, reaching £368,231. While there is still an increase, this marks the smallest growth during the summer period since the 2008 financial crisis. Rightmove pointed out that over the 12 months ending in early October, house prices declined by 0.8% due to reduced market activity, and the number of home sales agreements dropped by 17% compared to the same period last year. Recent data from Halifax Bank also revealed that house prices experienced their sharpest decline in 14 years in September.
The Bank of England has raised interest rates for the 14th consecutive time at its monetary policy meetings to combat inflation. In September, the Monetary Policy Committee voted to keep the base rate at 5.25%, the highest rate since the 2008 financial crisis.
Banks are concerned about the increase in loans and credit card usage
The Bank of England recently stated that, in the face of higher interest rates and rising living costs, consumers are taking measures such as extending mortgage loan terms and increasing credit card spending. These actions may potentially lead to future debt-related issues.
The Bank of England’s Financial Policy Committee (FPC) has been diligently monitoring the UK’s financial system. Recent data from the past three months indicates that some households are increasingly relying on credit cards to manage their budgets. As interest rates rise, borrowing costs grow, and combined with the pressures of rising living expenses, many individuals have had to seek alternative means to cover their day-to-day costs, placing additional strain on consumer spending.
Although the annual growth rate of credit card spending remains relatively stable at 11.8%, the committee believes that this trend “may expose households to greater short-term debt risk.”
UK Minister: We Need to Rebuild Global Development Reputation
UK Development Minister Andrew Mitchell acknowledged the harm resulting from the decision to reduce aid budgets due to pandemic-related spending cuts. He emphasized the necessity for the UK to restore its reputation as a global leader in aiding developing countries.
Mitchell delivered this message during a speech at the World Bank Annual Meeting in Marrakech, highlighting the vital role the UK fulfils. He has consistently voiced his opposition within his party, advocating against the government’s abandonment of its commitment to allocate 0.7% of national income to aid.
The Development Minister stated that the UK would generously contribute funds to the World Bank, supporting the bank’s provision of grants and interest-free loans to poorer countries. The UK also committed to capital increases for the World Bank and urged faster progress in debt relief for countries facing difficulties.
German Minister Extends Trade Relations Invitation to the UK
The German Finance Minister has extended a public invitation to the UK, aiming to establish a new agreement to enhance post-Brexit trade relations and reduce trade barriers and “day-to-day operational obstacles.”
Christian Lindner stated to the BBC, “This is an ongoing invitation to the UK: if you wish to bolster your trade ties with the EU, please reach out. We hold the UK and its values and people in high regard… If we can strengthen [trade relations] once more, I would be deeply appreciative.”
His remarks may come as a surprise to Maroš Šefčovič, Vice President of the European Commission, who negotiated the Brexit trade agreement. This also opens the door for UK Labour leader Keir Starmer, who has stated that if he wins the next election, he will seek to establish a “much better” relationship with the EU. Šefčovič has consistently maintained that the Brexit agreement will not be “thrown into the waste paper basket.” He also resisted calls from the UK and EU automotive industry to suspend electric vehicle export tariffs, scheduled to take effect in January next year.
The number of business bankruptcies in the UK has increased by 17% compared to the previous year
As of September 2023, the number of business bankruptcies has risen year-on-year to 1,967 cases, signifying a 17% increase from the same month last year. The most affected sectors include construction, manufacturing, and retail, illustrating the influence of higher interest rates and a significant decrease in residential construction.
Out of these cases, 395 businesses were associated with the construction industry, followed by 380 in the food and hotel sector, and 352 in the automotive industry, encompassing repair and petrol stations.
However, the overall number of business bankruptcies decreased by 15.2% compared to August, with 2,319 cases in August. These business bankruptcies included 255 compulsory liquidations, 1,576 creditors’ voluntary liquidations (CVLs), 125 administrations, and 11 company voluntary arrangements (CVAs).