2 min read
13 May

I spoke in a previous Berwyn Property Blog about Owner Occupiers’ Housing (OOH) costs and the fact the media in the UK is always ignoring this key measure that affects all of us in the UK as it can drive up inflation. For those that did not read our last OOH Blog the OOH data does play a key role in the rise or fall in the UK inflation numbers, and for those looking to invest in property the OOH number is a key metric worth viewing. (Sadly, it seems our MPs are happy to take the credit for lowering inflation, which they can’t control, and then going silent when inflation rises!) If the cost of Mortgages for many goes up,  then the OOH number will rise. About 55% of UK mortgages have been moved on to a higher interest rate since borrowing costs started to rise in December 2021, and another 5m mortgages are expected to be repriced by 2026. The rising costs of mortgages will drive up the OOH number so its an important number to monitor. 

Today I am looking at the March 2024 Data from the Government and from the FCA to view the Mortgage default or arrears numbers. I feel that maybe inflation will fall again in 2024, and this could trigger interest rates to to lower. Many in the Property market ask if inflation could rise next time, and if interests rates will fall in 2024? (Comment below what you feel will happen next time the Inflation numbers are reported?) 

The latest data we can see below and direct quotes from the ONS/Government website show OOH rises in the latest data. Note that the lowering of the UK inflation rate was partially offset by an upward effect from housing and household services, whose annual rate was 3.1% in March 2024, up from 2.9% to February. This compares with a recent annual peak of 11.8% observed in January and February 2023.  The legacy of Liz Truss did have a big impact on the Property Market despite what a recent book from the past PM might try to claim. Looking at the below black (OOH line) I note a rise for a long period (Since March 2021) and this really should get more media coverage! Maybe you know someone whose Mortgage costs have risen a great deal in the last year? 

From the Government chart below its good to see Food and non-alcoholic beverages falls, yet the OOH number rises as clearly shown below. “The owner occupiers' housing costs (OOH) component of CPIH rose by 6.3% in the 12 months to March 2024, up from 6.0% in February. This is the highest annual rate since July 1992 in the constructed historical series.”  

Given we have a slow economic growth forecast maybe the government should be doing more to help the Property sector in 2024? In my last OOH blog I said that the data showing people behind or late on Mortgage payments was also a key factor the media should maybe report. This is proven correct from the below FCA report. Data from the FCA report titled “Commentary on Mortgage lending statistics Q4 2023” and this does show more in arrears, rising by increasing 9.2%. 

The value of outstanding mortgage balances with arrears increased by 9.2% from the previous quarter, to £20.3 billion, and was 50.3% higher than a year earlier. The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.12% to 1.23%, the highest since 2016 Q4.”  Source: www.fca.org.uk/data/commentary-mortgage-lending-statistics-q4-2023 

Summary: As we are in the middle of May at the time of writing, I feel the OOH number could rise again in the next series of data, but we hope to see more Mortgages in the market, to hopefully lower any OOH rise. The number of mortgage arrears is a concern and something we will monitor, and hope lower interest rates arrive soon to lessen the pressure on those behind on payments. The lack of affordable housing and house building is a concern and means some rents are rising, and the rising Mortgage costs in my view look to have slowed consumer spending. I flag his OOH number in these blogs as I speak to many clients wanting to know more about the Property market, and the inflation numbers and rental yields in 2024/5. One example I am currently working on to help a client purchase a below market home that once renovated could offer them approx. £34-48k in Profit, or a 1st year rental yield of 7.1%, with rises in each year. (I also looked at a 3 year long term capital appreciation exit option for the client.) During the purchase of the Property I am also offering the client 1st Charge on Property as added security as the renovations are forecast to take over four months. This demonstrates how I offer strong security and detailed short and long term forecasts, coupled to strong profit opportunities. 

(I am also via my affiliation with a Tech Property business (See other Blog) could be stimulating the sector with a new version of Help to Buy. Just imagine what a boost to the Economy that would provide! More than 225,000 buyers had taken advantage of the old help to buy equity loan scheme, and its popularity soared over time – in the last quarter of 2018 it accounted for over 60 per cent of all new home purchases.) We will continue to review the OOH data and wider impacts on the Mortgage costs in the UK and maybe you can share your thoughts?

If you would like to know more about the £34-48k Profit Property Refurbishment Option, then contact me on the below number: 

Data: www.beta.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/march2024

(c) 2024