MPs to grill Bank of England over interest rates and inflation, as housing market weakens – business live

UK housebuilder Redrow has withdrawn its monetary steerage for 2024 because of altering market situations, and warned that this yr will likely be ‘difficult’.

Redrow has advised the Metropolis that “financial and political uncertainty” led to a fall in gross sales within the second half of 2022.

Its gross sales fee fell to 0.38 non-public reservations per outlet per week in July-December 2022, down from 0.64 a yr earlier. Mortgage charges rose sharply final autumn, hitting demand, because the disastrous mini-budget spooked the Metropolis.

Revenues within the second half of final yr dropped by £21m to £1.031bn, whereas pretax earnings shrank by £5m to £198m, Redrow stories.

Redrow says demand has picked up to date this yr, to 0.51 non-public reservations per outlet per week, which it calls an “encouraging begin” to the second half of its monetary yr.

However, the housebuilder has trimmed its forecast for revenues within the full monetary yr (to the tip of June) to £2.05bn from £2.1bn beforehand.

It provides:

Because of the latest change in market situations the Firm has withdrawn its steerage for 2024.

Matthew Pratt, chief govt of Redrow, says:

We’ve skilled a optimistic begin to second half buying and selling. While 2023 will likely be a difficult yr because the market resets, early indications are higher than anticipated and the market seems to be discovering a brand new, pure stage.

UK home costs are falling because the market adjusts to falling demand and rising mortgage charges, economists say.

Simon Rubinsohn, chief economist at RICS, says at this time’s ballot of surveyors reveals that the market remained muted in January:

“Though some respondents to the January RICS survey have famous a bit extra curiosity within the housing market as the brand new yr acquired underway, the general tone of the suggestions nonetheless stays subdued which isn’t altogether stunning given the soar in mortgage charges for the reason that autumn.

“Costs, in the meantime, are actually starting to replicate the shift in steadiness between demand and provide.

“Nevertheless, it’s questionable how a lot draw back to pricing there’s prone to be provided that latest macro forecasts from the Financial institution of England and others are actually envisaging a much less harsh financial surroundings this yr.

Victoria Scholar, head of funding at interactive investor, predicts borrowing might decide up later this yr:

“The Royal Establishment of Chartered Surveyors (RICS) home worth steadiness fell to -47 from -42 in December. The information fell to the bottom stage since April 2009 as potential consumers maintain off amid expectations that property costs will cool additional this yr and borrowing charges will ease.

Whereas home costs look set to fall this yr, a continual scarcity of provide and an enhancing view on the outlook for the UK financial system look set to forestall a extra painful slide. With the Financial institution of England approaching the height for rates of interest and mortgage lenders having to cost competitively amid the drop in demand, there could possibly be a decide up in borrowing later this yr, significantly if inflationary pressures on the cost-of-living proceed to ease.”

Jeremy Leaf, north London property agent, confirms that demand has weakened:

’There’s little doubt that demand will not be what it was just some months in the past following sharp rises in rates of interest and lives prices significantly.

‘Nevertheless, on the bottom, we’ve seen extra must, moderately than need to, transfer consumers as mortgage compensation and job prospects turn out to be much less daunting than beforehand envisaged.

’There may be some critical haggling underway however we’ve seen a softening in costs moderately than a correction whereas provide is slowly enhancing. Diminished competitors means transaction numbers are down, taking longer and are extra fragile.’

However, Tom Invoice, head of UK residential analysis at property brokers Knight Frank, says the market has calmed this yr:

“The primary few weeks of 2023 bear little resemblance to the chaotic closing three months of final yr within the UK housing market.

Mortgage charges have stabilised, pre-existing consumers are cautiously reactivating plans and new consumers are coming to phrases with the ‘new regular’ within the lending market. A number of the home worth progress that passed off in the course of the pandemic will unwind however because the shock of the mini-Funds fades, demand is proving extra resilient than anticipated.”

Property gross sales and home costs continued to say no throughout the UK in January, surveyors have reported.

Demand from new consumers and contemporary listings have been additionally down final month, the newest month-to-month snapshot from the Royal Establishment of Chartered Surveyors (Rics) reveals.

That is the ninth month-to-month fall in new purchaser inquiries in a row, whereas worth falls have been essentially the most widespread since 2009.

Rics mentioned all the indications level to an extra slowdown within the housing market within the coming months, as borrowing prices have risen sharply.

Its month-to-month ballot discovered that:

• Purchaser enquiries, agreed gross sales and new directions stay on a downward pattern

• Tenant demand sees a rise similtaneously landlord directions fall

• Home costs decline additional in all areas with the sharpest decline discovered within the East Midlands and South East

My colleague Julia Kollewe explains:

The Rics survey measures the distinction between the variety of property brokers and property surveyors reporting will increase and people experiencing decreases in numerous areas of the property market.

The amount of contemporary listings approaching to the market was additionally down, in line with the survey, with a internet steadiness of -14% respondents reporting a decline in new directions throughout January.

In the meantime, the newest suggestions on nationwide home costs factors to a different month-to-month decline, as the online steadiness weakened additional to -47% in contrast with a studying of -42% in December.

All areas of England are seeing home costs retreat at current, with the sharpest drops reported throughout the east Midlands and the south-east.

Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world financial system.

MPs are to quiz the Financial institution of England this morning, after the UK central financial institution raised rates of interest for the tenth time in a row final week.

The Treasury Committee are involved that the Financial institution could also be “behind the curve on inflation”, after it climbed to double-digit ranges final autumn.

MPs are prone to discover the outlook for inflation, and the probabilities of future rate of interest rises. They might additionally contact on the dissent on the Financial institution – as solely 7 of the 9 members of the Financial Coverage Committee supported final Thursday’s fee rise to 4%.

Different doubtless matters for dialogue embrace how power and commodity costs are impacting inflation, the Financial institution’s forecast of a UK recession and sluggish restoration, and the way the MPC will deal with the sale of the £875bn of presidency bonds on its books (the method often known as quantitative tightening).

BoE governor Andrew Bailey will likely be within the sizzling seat, alongside chief economist Huw Tablet, and policymakers Silvana Tenreyro (who voted to carry rates of interest at 3.5%) and Jonathan Haskel. The session begins at 9.45am.

Since final week’s fee rise, Tablet has warned in opposition to elevating borrowing prices too excessive, whereas MPC member Catherine Mann has predicted the Financial institution might maintain elevating rates of interest to forestall excessive ranges of inflation from changing into entrenched within the financial system.

Yesterday, the NIESR thinktank predicted the UK might keep away from recession this yr (the Financial institution, although, forecasts a contraction), however it might nonetheless really feel like a recession to thousands and thousands of households.

The common middle-income family faces successful to their private disposable earnings of 13%, NIESR says, reaching as much as £4,000 within the subsequent monetary yr.

The agenda

• 7am GMT: German inflation report for January

• 8.30am GMT: Sweden’s Riksbank rate of interest determination

• 9.30am GMT: Newest UK financial and enterprise exercise information

• 9.45am GMT: Treasury Committee query the Governor of the Financial institution of England and members of the Financial Coverage Committee

• 1.30pm GMT: US weekly jobless information