Biding our time for ‘fiscal clarity’ – GDP comment
Following the ONS estimate for GDP this morning, Richard Pike, Phoebus Software chief sales and marketing officer, says: “August already seems a long time ago and these figures really don’t represent anything that has happened in the last few weeks since the new government took control. However, the doom that the Bank of England was spreading regarding the country being in recession already has at least proved unfounded, so far. With the IMF cutting global GDP forecasts, the fact that our GDP estimate is down 0.3% in August following growth (albeit revised down) in July puts Britain in line with global predictions.
“That said, the events that have unfolded in the last few weeks are sure to show themselves in upcoming data sets as the country finds its feet under the new regime and figures out exactly what this government is trying to do. Something that we should find out when the Chancellor delivers his ‘fiscal clarity’ statement on the 31st. For the mortgage market the prediction that interest rates are likely to increase by up to one per cent in the next MPC meeting, is going to put more pressure on lenders and borrowers. Mainstream banks are in a better position than smaller lenders and we have already seen the number of available mortgage products halve in two weeks. Unfortunately, although the affordability buffer was set at 3% the rising cost of a mortgage is only part of increasing costs at the moment. Lenders were never asked to predict how much inflation would rise if interest rates went up. Now they have to look at affordability from a much more holistic angle to assess the risk.
“House prices have already started to come down, and you will never take away the desire to own a home in the UK, so it now depends on how much prices fall in comparison to how much everything else goes up. There is always appetite somewhere, and one positive to come from today’s estimate is that new work in construction increased. Brokers will also come into their own with so many remortgage opportunities in the coming months.”