Consumer Prices Index (CPI) inflation reduced for a record sixth month to 1.6% for the year to March 2014.
That means you now need to spend on average £101.60 to buy the same things 12 months ago. This sounds bad, but it is predicted to be the first time inflation will fall below average wage increases since 2008 when the latest figures are released.
Therefore in theory our buying power will increase for the first time since the “Credit Crunch” (is this the beginning of the end of the recession for real people).
The good news good news story is that the economy is growing, we seem to have demand lead growth and all well within the target inflation figure of 2%. This will take the pressure off any concerns for now about the need to raise interest rates and hopefully encourage stable growth. A word of caution though is that the world economy in general is still unstable so I would still look to be cautious on a month to month basis.
The official ONS statistics show the decrease in inflation came primarily from motor fuels with petrol prices unchanged between February and March this year compared with a rise of 2.2 pence per litre between the same two months a year ago. Diesel prices fell by 0.4 pence per litre this year compared with a rise of 1.9 pence per litre in 2013. Clothing and furniture & household goods also had a small positive effect on inflation.
We do need some inflation as it is an indicator of increasing demand and growth, and without it would be very difficult to repay the UK’s debts and could lead to stagnation as we are seeing in some parts of Europe.
Overall this is encouraging for business and also for Landlords with economic factors pointing in the right direction for their customers (tenants) and their costs (interest rates).
The Consumer Price index (CPI) inflation rate fell to 2% in December down from 2.1% in November finally hitting the Bank of England’s target medium term figure for inflation.
CPI is the measure used by Government for targeting inflation and this is the first time since November 2009 the inflation has been at or below this target. CPIH annual inflation, which is the measure of consumer price inflation including owner occupiers’ housing costs, was actually lower at 1.9% in December.
According to the Office for National Statistics (ONS) the largest contributions to the fall in inflation came from prices for food, non-alcoholic beverages and recreational goods and services. However, these were partially offset by an upward contribution from motor fuels.
This vindicates the Bank of England’s dogged insistence for the past 4 years that inflation was being caused by external rises in the cost of imports that we have no control over rather than any domestic demand lead inflation. Had we seen the Bank of England react to this inflation by increasing interest rates before the recovery, as called for by many sections of the press, we could have seen an even deeper recession than we have already.
The good news for Landlords with mortgages or commercial loans is that for the time being there is no pressure from inflation (the main economic target) to increase interest rates.
The main stream popular press are reporting that the next thing to worry about is unemployment dropping below 7% from its current 7.4% level. The 7% figure was only used as an economic reference by Mark Carney the governor of The Bank of England to show that we should not consider raising interest rates until the economy has hit this measure. It is NOT a figure that would trigger interest rate rises on its own.
The Prime Minister David Cameron said, “It’s welcome news that inflation is down and on target. As the economy grows and jobs are created this means more security for hard-working people.”
The Consumer Price Index CPI inflation figures for October show a year on year fall to 2.2% from 2.7% in September as released today by the Office for National Statistics (ONS).
This surprise fall means that the basket of goods and services measured under CPI which cost £100.00 in October last year would now cost £102.20. We are also now much closer to the Bank of England’s medium term target inflation rate of 2%, which inflation has been above since December 2009.
The Bank of England’s new forward guidance also indicated that it would not consider an increase in interest rates unless unemployment was also below 7%. We will know more when the Bank publishes it’s latest forecast tomorrow.
Although not directly related the European Central Bank also cut it’s rate from 0.5% to an all time low of 0.25% last week in an effort to alleviate fears of deflation (price falls) across Europe with inflation now running at 0.7% against a target of 2% as in the UK. A stalling European inflation rate will have some downward pressure on UK rates as they are our largest and closest trading partner.
The largest contributing sectors to the fall in CPI inflation came from transport (notably motor fuels) falling 1.5% and education (tuition fees) increasing by 8.2% down from 19.1% last year according to ONS figures. Falling transport prices may also have affected prices at supermarkets with food inflation falling from 4.8% to 4.3%.
However it is not all good news for inflation figures as the recent large price increases by energy suppliers has yet to take effect on, but economist are not predicting the Bank Base rate to be seriously reviewed even after the recent economic upturn until late 2015.
With inflation hitting a 20 year high at 5.2%, the headlines are screaming doom and gloom. Instead, step back and read what high inflation and quantitive easing means to landlords running a buy to let business.
The Consumer Price Index (CPI) – the government’s official inflation monitor – has registered 5.2% for September and is going to directly impact returns from savings and investments.
A saver paying basic rate tax (20%) would need a savings account paying 6.5% to earn a return, a higher-rate taxpayer (40%) would need an account paying at least 8.67%. Both are unobtainable in the current market. Continue reading How Will 5.2% Inflation Hit Buy to Let Investors?
Gross Mortgage Lending up 12% in May
According to new data from the Council of Mortgage Lenders, gross mortgage lending totalled an estimated £11.3 billion in May, which represented a 12% increase from the £10.1 billion lent in April, and was 1% higher than in May 2010. Gross mortgage lending includes lending for both house purchase and remortgage. Continue reading Gross mortgage lending increased 12% in May
The mortgage business is flatlining as buyers, sellers and lenders wait for the property market to jump start.
The latest property market statistics show fewer buyers are in the market and this is affecting sales and mortgage advances. Continue reading Flatlining property market is as good as it gets
The Bank of England voted to keep base rates at 0.5% for another month and to keep quantative easing at £200 billion.
The rate has not moved since March 2009 and quantative easing has remained locked at £200 billion since November 2009.
Few financial pundits are surprised by the decision as in the past few weeks, dissent within the bank’s monetary policy committee has been diluted by the replacement of interest rate hawk Andrew Sentance with moderate Ben Broadbent. Continue reading Bank of England holds rates at 0.5% again
A million buy to let properties could slide in to negative equity over the next two years if house prices keep falling, warns credit rating firm Standard and Poors.
Analysts at the agency reckon if house prices dropped by 5% this year and next year, 30% of the UK’s 3.1 million buy to let homes would be worth less than any mortgages owed on the properties.
Continue reading A million buy to lets may slip in to negative equity
Crazie & Co. Commercial Finance Brokers operate from Southampton UKbut they arrange business financing for SME’s throughout the England and Wales. The owners were in commercial banking and arranged all forms of funding from development finance and commercial mortgages through to invoice discounting and lease purchase finance.
Crazy & Co are not NACFB Members but probably would be if they were a real business.
NOTE – this is a spoof to demonstrate our SEO capabilities however, please carry on reading but by all means skip the next two paragraphs and don’t bother watching the video as it’s only there to show you where you could place your video. Continue reading Introducing Crazie & Co. Commercial Finance Brokers in Southampton, Dorset, UK
The Bank of England interest rate may hover around 0.5% for at least another two years because of a weak economy and overwhelming personal debt.
Bank governor Mervyn King has hit out at interest rise hawks speculating that rates must soon go up in a speech to a finance committee at the European Parliament. Continue reading UK interest rates may not rise for years, says BoE governor