Money digest: today’s need-to-know financial news | 27 May 2016

If as a teenager you couldn’t leave home quick enough, spare a thought for the 3.8 million young adults who will be living with their parents by 2025.

That’s the conclusion of a study by the insurer Aviva. The company found that a million more 21 to 34-year-olds are likely to find themselves living with their parents over the next decade thanks to the prohibitive cost of housing. The number of households containing two or more families is also expected to rise, from 1.5 million to 2.2 million.

Meanwhile, Hometrack reports that house prices in the UK’s biggest cities have jumped due to the buy-to-let surge, with Cambridge outpacing its rival Oxford. Average price growth in April was 10.4 per cent compared to the same time last year. During the uncertainty in the lead-up to the general election, the rate of growth was 6.6 per cent. Cambridge and London lead the top 20 cities of the UK in house price growth. Homes in Cambridge have increased in value by 15.8 per cent year-on-year while Oxford has now fallen down the leader board with price rises of 7.1 per cent.

Thisismoney.co.uk reports that the mortgage price war has flared up again to produce the cheapest home loan on the market. Yorkshire Building Society has launched a two-year fix at just 1.14 per cent. The deal requires a 35 per cent deposit and comes with a sizeable £1,345 fee.

The mortgage price war was most fierce last summer when a two-year fix could be obtained at 1.05 per cent, but signals that the Bank of England was thinking of raising the base rate led lenders to take the best deals off the market over the winter.

First-time buyers back in the market

First-time buyer activity has climbed to a two-year high, according to the latest First-Time Buyer Tracker from Your Move and Reeds Rains.

April saw 32,300 completed first-time buyer transactions, an improvement of 14.9 per cent compared to 28,100 in March and 50.9 per cent stronger than the 21,400 seen in January 2016. Now that changes to buy-to-let stamp duty have come into force, much of the short-term competition for properties from buy-to-let landlords has dropped out of the market.

The significant sales surge means that April has seen the highest monthly number of completed first-time buyer transactions in almost two years, with sales surpassing totals from the last 22 months, since the 33,300 total reached in June 2014.

Offshore London

The Guardian devotes its front page to the news that 40,000 properties across London are owned by secretive offshore companies, an increase of 9 per cent over the past 10 months. An analysis of Land Registry data shows that entire developments from the East End to Knightsbridge have been sold to anonymous owners shielded by companies in tax havens including Panama, Liechtenstein and the British Virgin Islands. Even wine cellars and car parking spaces have been registered offshore, according to the public records. The biggest concentrations are in the City of London and the City of Westminster, where 10 per cent of all properties are owned in offshore tax havens; the figure is 7 per cent in the Royal Borough of Kensington and Chelsea, which includes the wealthy enclaves of Fulham and Knightsbridge. Household bills Thisismoney.co.uk reports that the average British household had £200 a week to spend on extras in April after paying for basic food expenses, bills, housing costs and taxes.

Asda said that households’ discretionary income last month rose by £12, or 6.3 per cent on a year ago to lodge a record high since its Income Tracker began in 2008. Year-on-year growth in spending power has remained above £10 per week for a full year and a half, marking 18 consecutive months of double-digit growth for families’ bank accounts, Asda said.

Pensions

Proposals to change Tata’s pension scheme would be unique to the company and would not be applied more broadly, Business Secretary Sajid Javid said yesterday. Speaking in Parliament, Javid said he was ‘wary of setting a precedent’.

Tata is looking to sell its loss-making UK business but the pension deficit is said to be hampering the process. However pension experts warned earlier that the changes could take ministers down a ‘dangerous path’. In other pensions news, the Treasury has warned that millions of current and future pensioners will be worse off if the UK leaves the European Union. Its analysis suggests Brexit would cause inflation to rise, eroding the value of State pension increases, costing recipients £137 a year. Those with an additional pension pot worth £60,000 would see its value drop by £1,900, the Treasury said. However, Vote Leave said the analysis was ‘utterly outrageous’. Former Pensions Secretary Iain Duncan Smith, who is campaigning for Vote Leave, said: ‘This is an utterly outrageous attempt by the Government to do down people’s pensions and is little more than a cynical attempt to distract from the Government’s broken promises on immigration.’

Meanwhile, a declaration at the G7 meeting in Japan says a vote by the UK to leave the European Union would pose a ‘serious threat to global growth’. In its final statement, the group warned that a UK exit from the EU would reverse the trend of increased global trade, investment and jobs.