HOUSE PRICES FALL FOR THE SECOND MONTH IN A ROW
House prices fell by 0.4% in April
to £261,962, following a 0.2% drop
in March.
UK house prices declined for the second
consecutive month in April, influenced by
uncertainties around interest rates and
rising mortgage costs, which impact the
traditional spring homebuying season.
According to the Nationwide Building
Society, April’s average house price fell
by 0.4% to £261,962, following a 0.2%
drop in March. This reduction marks a
decrease of £11,700 since August 2022.
Nationwide’s index showed that annual
house price growth slowed to 0.6% in
April from 1.6% in March. This trend
placed additional pressure on the Bank of
England ahead of its 9 May interest rate
announcement. At the beginning of May,
major banks such as Barclays, HSBC
and NatWest raised their fixed mortgage
rates, and Nationwide increased
some rates by up to 0.25 percentage
points. The average new two-year fixed
mortgage rate has risen to 5.91%.
The housing market has shown signs of
cooling despite expecting a bank interest
rate cut later this year, possibly as early
as June but more likely around August or
September. However, mortgage approvals
peaked in March, reaching a high not
seen since September 2022.
A Nationwide survey revealed that 49%
of prospective first-time buyers have
postponed their purchasing plans in
the past year due to high house
prices and increased mortgage costs.
Additionally, 53% cited high house prices
as a deterrent, while rising mortgage
expenses hindered 41%. Despite these
challenges, 55% of respondents were
open to buying in less-expensive regions
to afford a bigger home.
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UK PREDICTED SLOWEST GROWTH AMONG RICH NATIONS
GDP is expected to rise by only 1% in 2025,
below other G7 nations such as Canada,
France, Germany, Italy, Japan and the US.
The Organisation for Economic Cooperation
and Development (OECD) has
forecasted that the UK’s gross domestic
product (GDP) will increase by only 1% in
2025, placing it below other G7 nations
such as Canada, France, Germany, Italy,
Japan and the US.
The UK economy is described as “sluggish”
by the OECD, primarily due to the residual
impacts of multiple interest rate hikes. It
predicts a modest 0.4% growth this year, a
reduction from a previous estimate of 0.7%.
This year, only Germany will have slower
economic growth than the UK, placing the
UK’s expansion rate as the second slowest
among the G7 nations.
The OECD attributes ongoing high
inflation and the uncertainty surrounding
future interest rate adjustments by
the Bank of England (BoE) as factors
dissuading investment. Despite recent
national insurance cuts totalling a 4%
reduction, the OECD notes that frozen
personal income tax thresholds continue
to impose a fiscal drag, where individuals
may end up in higher tax brackets as their
earnings increase.
Furthermore, a governmental policy
enabling full tax deductions for business
investments in machinery and equipment
is seen as insufficient to offset the rise in
corporation tax from 19% to 25%.
The OECD suggests that long-term
measures, including the free childcare
scheme, could alleviate fiscal pressures.
With inflation easing from last year’s
40-year peak to 3.2% in April and
interest rates steady at 5.25% since
last September, the OECD anticipates a
reduction in borrowing costs beginning
this autumn, potentially reaching 3.75%
by the end of next year.
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SME ENERGY STANDING CHARGES ARE TOO HIGH
Some SMEs’ costs have risen by more
than 1000%. Nearly two-thirds of these
businesses cite utility costs as a key
factor driving higher expenses.
Small businesses in the UK are
grappling with significant increases
in fixed daily utility costs, escalating
regardless of usage. Recent data
shows that nearly two-thirds of these
businesses cite utility costs as a key
factor driving higher expenses.
The Federation of Small Businesses
(FSB) reports that one small firm saw
its daily standing charge soar from
£70.94 in July 2021 to £969.64 by
September 2023, an increase of
1,266.9%, and amounting to over
£3,500 annually. The customer was
reportedly unaware of this dramatic rise.
Rural small businesses are particularly
affected, highlighting a growing ruralurban
divide and hindering efforts to
support remote UK areas. Standing
charges cover network infrastructure and
policy initiatives such as the Warm Home
Discount, though their complexity often
confounds small business owners.
Unlike domestic consumers, these
businesses aren’t protected by an energy
price cap, leading many to believe their
costs are unjustly inflated.
The FSB said: “SMEs can choose to limit
their energy consumption to avoid paying
higher consumption-related bills, but an
increase in the standing charge places an
inescapable financial burden on businesses
merely for being connected to the grid.”
“Standing charges, in turn, become
a regressive form of billing for small
businesses, dampening their growth,
confidence and ability to invest.“
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MPS WARN UNFAIR BANKING IS HARMING SMALL FIRMS
The Treasury Committee says
confidence among SMEs has fallen.
The Treasury Committee has warned
about the negative impacts of unfair
banking practices and inadequate
financial regulation on small and medium sized
enterprises (SMEs). The report,
stemming from an inquiry into SME
access to finance, highlights the struggles
these businesses have faced over the
past five years, exacerbated by the global
pandemic and energy crisis.
The committee criticised the widespread
use of personal guarantees, which
often require borrowers to secure
loans against personal assets, such
as their homes. It also raised concerns
about “debanking”, noting that in 2023
alone, banks closed around 140,000
SME accounts, frequently without
sufficient explanation.
The report condemned the current
mechanisms for resolving disputes
between SMEs and banks as inadequate.
The Financial Ombudsman Service
lacks the resources and expertise for
complex SME cases, while the Business
Banking Resolution Service (BBRS) has
been ineffective and is recommended for
closure. Despite costing over £40m, the
BBRS has resolved only 58 cases.
The committee has made several
recommendations to enhance
transparency and fairness in banking
for SMEs. These include urging the
Financial Conduct Authority (FCA) to
enforce greater transparency in account
closures and to amend regulations
regarding the use of personal guarantees.
Furthermore, it suggests expanding the
scope of the Financial Ombudsman
Service and calls on the Treasury to
develop a new, independent system to
support SMEs outside the Ombudsman’s
current remit.
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