Interest rates, housing demand and pension fears

The Bank of England could make the first cut to UK interest rates in more than seven years at lunchtime today. The governor Mark Carney has previously indicated that the Monetary Policy Committee would vote to cut rates in July or August.

The probable reduction from 0.5 per cent to 0.25 per cent is intended to boost the UK economy in the wake of the Brexit vote. Although a cut is not certain, financial markets put the probability at about 80 per cent. The FTSE 100 opened higher ahead of the expected rate cut. Shortly after opening the share index was 0.82 per cent or 54.77 points higher at 6,725.28. The FTSE 250 share index, which some regard as a more accurate reflection of UK business, was up 0.64 per cent or 108 points at 16,859. Meanwhile, Philip Hammond, the new Chancellor of the Exchequer, has ruled out an emergency Budget following the UK’s vote to leave the EU. The Chancellor, appointed by new Prime Minister Theresa May yesterday, said he would monitor the economic situation over the summer before setting out spending targets as normal in the autumn statement. Housing

The supply of homes on the UK market fell at its sharpest rate to date and buyer demand hit an eight-year low as Brexit was confirmed, surveyors say.

House prices are expected to fall across the UK in the next three months, the Royal Institution of Chartered Surveyors survey suggested. The dip in prices is only expected to persist over the next year in London and East Anglia. This is the first significant housing survey judging the impact of Brexit. ‘Big events such as elections typically do unsettle markets, so it is no surprise that the EU referendum has been associated with a downturn in activity,’ said Simon Rubinsohn, Rics chief economist. ‘However, even without the build-up to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year.’ In other housing news, homeowners borrowed £9.4 billion for house purchases in May, up 15 per cent month-on-month and 8 per cent year-on-year. The Council of Mortgage Lenders latest figures showed this equated to 53,800 loans, up 13 per cent on April and 5 per cent on May 2015. First-time buyers borrowed £4.3 billion, up 10 per cent on April and 23 per cent on May last year. This meant 27,500 loans, up 9 per cent month-on-month and 16 per cent year-on-year. Pensions

Millions of Britons are concerned about the future of state pensions and the majority do not trust the current government to make fair decisions in this regard, Thisismoney reports.

A third of people expect state pension to be less generous by the time they retire, while some 10 per cent do not believe state pension will even exist by then, according to the poll by pensions and insurance firm Aegon UK.

Only a third believe state pension will be as generous when they retire as it is today and just 11 per cent believe it will be more generous, the survey of about 4,000 people found.

Mortgages

The website also reports that thousands of borrowers trapped on interest-only mortgages with Santander and who have no plan for how to repay their loan before they retire have been thrown a lifeline.

The bank has confirmed a long-anticipated deal with Legal & General that will offer Santander borrowers the option to switch their interest-only deal to a lifetime mortgage.

Lifetime mortgages are a form of equity release – a product similar in style to a mortgage but without monthly repayments, designed to free up borrowers’ wealth locked in their home without hitting their disposable income.