Jade Buswell

Jade Buswell

Jade manages all the internal processes and human resources within UK Property Finance Limited. After many years working within the financial sector and working with qualified CeMAP advisors, Jade has gained a wealth of knowledge and ensures UK Property Finance fully complies with the FCA regulations whilst managing the larger customer accounts and partner relations. Jade has been shortlisted for the senior female executive award with The Women's Awards for the East Midlands and is a valuable asset to have onside when sourcing the best financial deals.

What You Need to Know About Buying Homes at Auction

Whether you are looking to pick up your dream home at a rock-bottom price or turn a quick profit with a fixer-upper, auction property purchases can be just the thing. Buying homes at auction is quicker and easier than becoming part of a conventional property chain, and the savings on offer are unbeatable.

But as properties purchased at auction call for prompt payment, typically within 28 days, conventional mortgages have little practical value. With the typical residential mortgage currently taking around three months to arrange, this 28-day payment deadline calls for an alternative funding solution.

The benefits of property auctions

One immediate benefit of buying properties at auction is the speed and simplicity of the transaction. Within 28 days, the property purchase and transfer process in its entirety is complete. You benefit from the lower prices afforded to cash buyers, and there is zero risk of being ‘gazumped’ by competing bidders.

If yours is the winning bid on the day, the property is yours, and at the exact price quoted.

In addition, a much broader range of homes go under the hammer at auction than appear on the conventional property market. Homes that need to be sold as quickly as possible, properties in need of repairs and renovations, and non-standard properties considered ‘unmortgageable’ by major banks—all potential bargains in the making.

You can even buy rental properties at auction that already have tenants living in them, enabling you to begin collecting regular rent payments in less than a month.

The drawbacks of property auctions

On the downside, the shorter transaction times associated with auction property purchases can prove problematic. If your bid is successful, you will be expected to pay a non-refundable reservation fee on the spot.

This may be 2.5% of the property’s agreed price (plus VAT) or a set fee of around £5,000. The contracts do not need to be signed and exchanged right away, but you will forfeit this initial reservation fee if you back out of the deal.

Upon signing the contract and agreeing to purchase the property, you will be expected to pay a 10% deposit. At this point, you will usually have 28 days (sometimes slightly longer) to come up with the rest of the money.

Another drawback to property auctions is the risk of being outbid, which could happen after paying for a formal survey of the property. There are also no guarantees that yours will be the winning bid, irrespective of how many lots you bid on and how many auctions you attend.

Financing an auction purchase

The time-critical nature of auction property purchases calls for something much swifter than a conventional mortgage. In addition, it is essential to arrange the necessary funding before the auction, in the form of pre-approval or a decision in principle. This will enable you to access the funds you need if your bid is successful without having to start your application from scratch.

Most buyers pay the 10% deposit on the homes they buy at auction out of their own pockets, or perhaps by way of a personal loan or a credit card payment on the day. It is therefore important to ensure you have access to this 10% deposit on the day itself, or your bid will be cancelled and the property sold to someone else.

Bridging loans for auction property payments

One of the most convenient and cost-effective ways to fund an auction property purchase is bridging finance. Where approval is obtained in advance, a bridging loan can be arranged and accessed within a few working days.

Bridging finance can be secured against most types of property or land and can also be used to purchase any type of property, irrespective of its condition. This makes it a particularly suitable facility for auction property purchases, where non-standard homes in questionable states of repair often go under the hammer.

A strictly short-term facility, bridging finance is designed to be repaid within a few months and charged at a monthly rate of around 0.5%. It can therefore be ideal for investors looking to flip properties for fast profits, using the funds raised at the point of sale to repay the loan.

It is also possible to repay a bridging loan by transitioning it to a conventional mortgage or similar long-term repayment facility.

Auction Preparation

In the weeks and months leading up to an auction, full details of the properties set to go under the hammer will be released. This will include a “guide price” for each home, which in most instances will be significantly lower than the price it sells for.

If there is a property you are interested in buying, you will need to arrange an in-person viewing and a professional survey. Particularly if it is a home in need of renovations and repairs, you need to know exactly what kind of work will be needed to bring it up to an acceptable standard.

At this point, you could also contact a local architect or builder to provide you with an estimate regarding the proposed renovations. They may be willing to conduct a survey and provide an estimate for free if you subsequently use their services if and when your bid is successful.

Take a good look at the legal pack for the property you intend to buy and have a solicitor examine its contents on your behalf. If this is to be your first property auction, visit one or two auctions as a visitor in advance to get a feel for how the whole thing works.

On the day of the auction

Arriving early will give you the best shot at securing a good seat in the auction room. Ideally, you should be in a spot where you can see your competing bidders but also where the auctioneer can clearly see you.

When the auction begins, don’t be tempted to exceed your budget, and try to keep your emotions in check. Even if you have your heart set on a property for sale, you need to remain grounded and bid objectively.

If your bid is successful, you will need to provide two forms of identification, along with evidence that you can pay the deposit.

Should the property you are interested in fail to sell, having not reached its reserve price, request the contact details of the seller; you may be able to negotiate with them directly and perhaps pick up the lot for less than you intended to spend.

Can you buy property at an auction with a mortgage?

In terms of conventional mortgages, the answer is no. Based on standard mortgage processing times alone, it would be practically impossible to arrange a traditional mortgage within the 28-day time limit.

There may be an occasional exception to the rule where an agreement is reached with a lender in advance to secure the required funds as promptly as possible. But this simply isn’t an option with most major lenders, where typical mortgage application processing times average around 12 weeks.

In addition, many (if not most) of the properties that go under the hammer at auction would not qualify for a conventional mortgage with a mainstream lender. Auction properties are often deemed ‘non-standard’ or ‘unmortgageable’ due to their repair and renovation requirements.

Fast-access funding is available in the form of bridging finance, along with specialist auction finance and development finance loans for established investors. Issued as short-term facilities, fast-access loans like these can be repaid using longer-term mortgages once the property has been restored to an acceptable standard.

Consult with an independent broker ahead of the auction to discuss the most cost-effective funding options available.

What happens if you can’t meet the completion deadline?

If a buyer is unable to pay for their property in full within the 28-day deadline, the transaction is cancelled, and they forfeit their deposit. Depending on the terms and conditions of the agreement, they may also be liable for the costs of listing the property once again at a future auction.

However, there is usually some leeway where buyers raise their issues with the vendor ahead of time. For example, if you simply need an extra few days or weeks to come up with the money, they will most likely demonstrate a good deal of flexibility.

After all, it is in nobody’s best interests to take the whole thing back to the drawing board.

If you have any questions or concerns regarding your ability to meet the completion deadline, ensure they are discussed with the seller at the earliest possible stage.

Pros and cons of buying at an auction

In summary, a brief overview of the pros and cons of buying properties at auction:

Pros

  • The opportunity to secure an unbeatable bargain
  • A much faster and simpler transaction
  • No reliance on risky property chains
  • Zero risk of being gazumped by competing buyers
  • A broader range of properties to choose from

Cons

  • There are no guarantees you will walk away with a property
  • Full payment is required within 28 days.

Auction property purchases can therefore be advantageous in many ways, but they will always call for careful planning and forethought.

For more information on how to fund auction property purchases or to discuss the benefits of buying at auction in more detail, contact a member of the team at UK Property Finance today.

Increased Mortgage Interest Rates Combined with the Cost of Living Crisis Forces Buyers and Homeowners to Dip into Savings

It’s no secret that times are hard for millions of UK residents. With the cost of living escalating at a speed not seen since the big recession back in 2008 and the cost of mortgages constantly on the rise, affordability for new buyers is becoming increasingly out of reach, with many not having enough savings for a deposit and others struggling to meet their current monthly mortgage obligations.

Cost of living crisis

Adding to the misery is the fact that inflation rates are at the highest seen for thirty years, pushing monthly outgoings through the roof for the vast majority of the population. Wages are certainly not keeping up with the rapid price increases, resulting in many accessing savings just to meet their monthly commitments. With inflation at a thirty-year high of 9% and expected to reach 10% by next year, households will need to tighten their belts even further.

And it’s not just inflation that is causing chaos for many; the enormous gas and electricity price hike is a worry for almost every household in the country. This is due to the impending increase in the energy price cap coming in October and the embargo on oil and gas from Russia. Diesel and petrol prices are at the highest ever seen, which is having a detrimental effect on drivers and, in turn, causing further increases in prices due to the added costs of manufacturing and logistics.

The Bank of England increased the base rate for the fourth time in a row

Despite increased mortgage interest rates, the property market remains surprisingly buoyant, but experts are predicting a marked slowdown over the next year, when house prices are expected to stabilise and, with any luck, the economy will start to recover, although there is still a lot of uncertainty surrounding this expectation as inflation continues on an upward trajectory.

The main reason for the interest rate hike is that the Bank of England has raised the base rate four consecutive times since December 2021, increasing base rates from 0.1% to 1%. Their reasoning for doing this is to try to tackle the huge increase in inflation. The concept behind this is to discourage people from spending and encourage saving instead.

A third of the income needed for mortgage repayments

Average monthly mortgage repayments are now approximately a third of monthly income. Annual income, on average, in the UK is currently £31,447. So for example, a home bought for the average price of £276,019 on a 25-year loan period with a 75% LTV (£69,000 deposit) and a fixed rate at the current average mortgage rate of 1.84% will equate to monthly repayments of £859.41.

Current figures show homeowners using 32.8% of their monthly wage to meet their repayment obligation, which is up 5% since before the COVID-19 pandemic and close to levels seen during the credit crunch of 2008 when the UK was plunged into a crippling recession.

CEO of Octane Capital, Jonathan Samuels, commented: “The cost of living crisis is a current cause of great concern, and many homeowners are not only combating the inflated cost of day-to-day living but also the monthly cost of their mortgage following a string of interest rate increases.

“At the same time, wage growth has simply failed to keep pace with these rising costs, and so the proportion of our income required to cover our monthly mortgage commitments is now substantially higher than it has been for many years.

“Unfortunately, this cost only looks set to increase, as we expect to see interest rates increase further throughout the year. The best advice for those currently struggling is to consult a mortgage professional and see if they can swap to a product offering a better rate. For those currently looking to buy, it’s vital to factor in any potential increase and not borrow beyond your means based on current rates.

“While the current cost of borrowing may still remain fairly favourable, it’s vital you consider what any further increases may mean for your financial stability, as those borrowing right up to their limits initially are sure to struggle further down the line.”

Savers are forced to access funds to survive

It’s not surprising that a huge number of UK residents have been forced to use savings to get through the month, particularly in the last year. That is true for those lucky enough to have savings to fall back on, but the financial strain on those who have little to no savings is on the rise, with many getting deeper into debt, and the forecast for the next twelve months does not look bright.

According to a report from the Yorkshire Building Society, aptly named “Inflation Nation”, 17% of UK households had no savings at all. The report, which surveyed 4000 households, revealed that 39% had withdrawn funds from their savings account, with a further 17% taking out over £1,000 to meet their financial obligations.

The report went on to reveal that the vast majority of people were either unable to save anything at all or were saving significantly less than they would typically be able to save.

The report went on to show that, of those surveyed, around 40% predicted increases of between £100 and £500 in monthly bills over the next year, making it even harder, if not totally impossible, to increase savings.

Government help for millions

On May 26, Rishi Sunak announced a £15 billion package to help UK households with escalating energy prices. Poorer households will be eligible for a one-off £650 payment to help with gas and electricity bills, with the rest of UK households receiving a £400 discount.

He stated, “We know that other countries in Europe have taken measures to help households with their energy bills, so this is obviously very helpful from an economic perspective, unlike the previous plan that was made available in March.”

“The government’s measures are really quite important because we know that there are a lot of people in this country who don’t have any form of savings.

“If a large proportion of the population starts to reduce their expenditure in other parts of the economy, then I think we could be in a very, very difficult economic situation.”

Although this help is welcome, for many households, it will not be nearly enough to keep them out of an impending financial hole over the next twelve months, with the cost of living crisis not expected to end any time soon.

What Investors Need to Know About Development Finance in 2022

Development finance is an ideal solution for developers and property investors looking to fund the construction or refurbishment of their properties using short-term funding solutions. When looking at funding for your development project, it is imperative that you familiarise yourself with all the options available so that you can make an informed decision.

What is development finance?

Development finance is a short-term loan for property development that is exclusively used for the construction or refurbishment of a property or property. It provides funds for investors and developers to manage project purchases and build costs.

Whether you are considering a residential, commercial, or mixed-use project, development finance could be a funding option available to you, including ground-up new builds, knock-down and rebuild projects, conversions, and refurbishments.

Development loans are typically arranged very quickly as opposed to other long-term funding products, such as mortgages, which can take considerably longer to be approved.

Most lenders will offer a loan period of 6 to 24 months; however, some, but not all, may extend this should you need to.

Although similar to bridging finance, development finance can provide both an upfront loan towards the site acquisition as well as further funding released at different stages throughout the project.

The Advantages and Disadvantages of Development Finance

Development finance offers unique benefits to property developers that other loan products can’t; however, it is vital that you take into consideration both the advantages and disadvantages before starting your development project.

Advantages

  • Quick to arrange

Development finance can be made available quicker than applying for a mortgage. Funds can be arranged in a short space of time, typically between 1 and 4 weeks, which allows the development project to get underway while alternative funding is arranged.

  • Short-term loan

Development finance loans are available for a short period of time, usually between 6 and 24 months. The transient nature of this type of finance reduces the risk of being burdened by debt for an extended period or facing high early repayment penalties should you wish to repay early.

  • Roll-up interest 

Development finance offers developers the opportunity to repay all the capital and interest in a single payment at the end of the term. The interest ‘rolls up’, eliminating the need for regular monthly payments.

  • Competitive interest rates

If you are an experienced developer, you may be able to secure a development loan at a lower interest rate than inexperienced developers. Loans can be secured at a lower interest rate for larger projects and can be further lowered if you borrow a lower proportion of the gross development value (GDV).

Considering all these factors, we have a realistic range of 16% per annum as the upper limit for the interest rate on a development finance project that can go as low as 5% per annum for experienced developers borrowing a large amount at a low proportion of the GDV.

  • Take on large projects.

Development finance paves the way for developers to take on ambitious projects with higher complexity and enables them to work on multiple development projects simultaneously. Traditional financing options can restrict developers from experimenting with more complex projects, whereas development finance offers the flexibility to work on projects of varying size and complexity.

  • Available for a wide range of projects

Development finance is ideal for new-build, residential, commercial, and semi-commercial property development projects. It is especially beneficial for properties that require remedial work prior to being funded using traditional forms of financing. Developers can borrow loans even for derelict properties that would be impossible to get a mortgage for. The short-term financing option allows developers to refurbish any property and sell it at a profit.

  • Limited capital outlay

Development finance doesn’t require any upfront payments other than your deposit. Instead, your cash on hand can be used for other expenses or simply to improve your cash flow position.

Disadvantages

  • Eligibility criteria

Most lenders have strict eligibility criteria when approving development finance, particularly when the borrower is a first-time property developer. Developers with extensive portfolios will find it significantly easier to be approved for this type of finance.

  • Planning permissions

Many lenders will require you to have all planning permissions needed for the development in place before considering any application for development finance. Issues with planning may cause considerable additional costs and problems down the line, and therefore the lender will want to see evidence that planning has been approved prior to approval.

  • Paperwork

As the application process for development finance can be complex, it is imperative that you have all your paperwork in order before you apply. Lenders will expect to see an extensive plan detailing all aspects of the development, including planning permission, designs, drawings, and most importantly, costings.

  • Additional fees

It is important to take into account any additional fees when costing your development project. These include arrangement fees, valuation fees, and legal fees, which can usually be added to the loan amount and therefore will not need to be paid upfront. There is also likely to be an exit fee at the end of the loan period when full repayment is made.

  • Development finance for limited companies

For limited companies applying for development finance, most lenders will require some form of personal guarantee from the company’s directors to minimise the risk to themselves. It is worth noting that individuals applying will be personally liable for the entirety of the loan.

Who uses development finance?

As the name suggests, development finance is primarily used by property developers and investors for ground-up and extensive renovation projects. Funding can be used for land purchases and for the entire building cost. It is not unusual for a lender to fund, for example, 50% of the land purchase and 70% of the building costs, meaning that the developer will have fewer upfront costs, which in turn positively affects their cash flow, which can be used in other areas.

Is development finance right for me?

Once you have conducted your due diligence, it is time to make a final decision. So, how do you determine whether development finance suits you and your business needs? Answering a few simple questions can help you gain a better understanding:

Evaluating your business needs is the first step to determining if development finance is ideal for you.

  • Analyse whether your business needs a short-term cash inflow or long-term financial aid.
  • Assess your current financial situation to determine your ability to repay the loan on time without disturbing your finances.
  • Lastly, gauge if you can provide the necessary paperwork to qualify for and access the development loan.

If you can answer these questions comfortably, development finance might be what you need to fund your project. An experienced development finance broker can help developers access the most comprehensive list of development finance lenders at the lowest market rates.

 

Individuals, builders, and businesses looking for quick, short-term funding can benefit from development finance to fund their development projects. It provides access to the funds developers need to develop or renovate residential, commercial, or mixed-use properties.

Working with an experienced development finance broker, such as UK Property Finance Ltd, ensures that the funds you require will be delivered on time and professionally. Talk to our team today for flexible, fast property development loan financing.

Inflation on Property Prices remains at 11.2% but Signs Show an Expected Slow Down in the Property Market

Inflation on property prices remains at 11.2%, but signs show an expected slowdown in the property market.

According to a report by Nationwide, property price inflation is currently stuck in double digits, but it is predicted that we will soon see a slowdown in the market.

The average home price has dropped from a growth of 12.1% in April to 11.2% in May. The current average property price sits at £269,914, equating to an increase of £27,082 from the same time last year.

Nationwide remarked that the property market was faring better than predicted despite the spiralling cost of living and recent mortgage rate increases, but that we should expect to see the rise in home prices slow down in the coming months.

Robert Gardner, Nationwide’s chief economist, said: ‘Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.

 ‘Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows and the number of job vacancies is at a record high.

 ‘At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.

 ‘We continue to expect the housing market to slow as the year progresses. Household finances are likely to remain under pressure, with inflation set to reach double digits in the coming quarters if global energy prices remain high.

 ‘Measures of consumer confidence have already fallen towards record lows. Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.’

Since the beginning of the pandemic, house prices have seen such a rapid increase that, when compared with the average income, the cost of buying property has never been higher. This impacts affordability and has resulted in many potential buyers being totally priced out of the market.

The ratio of earnings to house prices has increased from a long-term average of 4.5 to an alarming 7 times.

Previously, buyers have been able to take advantage of low-interest rates to buy more expensive homes; however, with the recent interest rates being increased four times in succession by the Bank of England, from 0.1% to 1%, affordability has taken a serious hit.

Over just a year, fixed interest rate deals as low as 1% have risen to just under 2.5% for a similar mortgage. This impacts negatively on the amount buyers are able to borrow, particularly at this time when the cost of living expenses and the energy crisis are already affecting how much people can spend.

Jamie Lennox, director at Norwich-based mortgage broker Dimora Mortgages, said: ‘The tide could be turning as a number of clients who have been house hunting for the past six months are now finally getting offers accepted where, before, they were consistently being outbid by other buyers.

‘A lot of buyers are currently committed to the idea of moving, but once they finally complete, we believe the housing market could start to dramatically change with a lack of new people considering moving.’

20% of Brits Now Use Loans to Buy Gifts for Parties and Events

UK households may be feeling the pinch of unprecedented living cost increases, but it seems even record inflation cannot quell the country’s collective craving for good times. According to the latest data published by Forbes Advisor, around 20% of Brits are now using loans (and other financial products) to buy gifts for important events and celebrations.

According to Forbes, 11% of UK residents have used personal loans to cover the costs of attending and buying gifts for events like birthdays, weddings, and christenings. Similarly, 11% said they had resorted to potentially expensive payday loans to ensure they were able to attend parties and events, while a full 26% said that they put the costs of attending events on their credit cards.

Elsewhere, 12% said that they had borrowed money from family or friends to cover the attendance and gift costs of these ‘life events’ and other important happenings.

Cost of living increases hit hard

With UK inflation at a 30-year high of 5.5%, every UK household is feeling the pinch of unprecedented cost of living increases. As a result, 26% of those surveyed by Forbes said that they have had to spend less on parties and events (attendance and giving gifts) due to rising fuel, energy, and food costs.

Around 13% said they have been rendered unable to buy gifts for such events or attend them in the first place due to ongoing living cost hikes.

Even so, Brits continue to spend surprisingly significant amounts of money on attending important events. According to the Forbes survey, this is how much the average person spends on attending and buying gifts for major life events:

  1. Family wedding: £235
  2. Hen/stag party: £199
  3. Friend’s wedding: £199
  4. Graduation: £189
  5. Baby shower: £165
  6. Engagement party: £159
  7. Anniversary party: £156
  8. Naming ceremony: £154
  9. Adult birthday party: £142
  10.  House-warming: £138

The financial crisis is putting a major strain on relationships, with more than 40% of those surveyed admitting they had fallen out with friends and family members over event attendance and gift costs. In addition, more than 50% said that if it were socially acceptable to do so, they would prefer not to give gifts when attending important events like those above.

“The end of COVID-related restrictions on international travel and guest numbers at events such as weddings, self-isolation, and mask-wearing is a massive breath of fresh air as we head towards a brighter spring and summer of 2022,” commented Laura Howard, personal finance expert at Forbes Advisor.

“Yet, as we come out of one crisis, the weight bears down heavier on another—the soaring cost of living. Of course, this is in no way comparable to the suffering that millions of Ukrainians fleeing their homes as a result of the war are facing right now. But, for those of us on UK soil, it’s the kind of worry that can keep us awake at night.

“Inflation as measured by the Consumer Prices Index (CPI) measured 5.5% in January—a 30-year high—while the figure for February is almost certain to be higher still. And even that figure will not reflect the next hike in energy costs set to whack household budgets in April.

“We have little choice but to power our homes, fill up our cars with fuel, and do the weekly food shop—all costs that have soared since the pandemic began. But for more and more households, this is simply where the money runs out and ‘extras’ such as life celebrations become unaffordable.”

“It’s little surprise then that an increasing number of us are resorting to borrowing to fund these celebrations—in some cases even using payday loans.”

“Cutting back on expenses is no easy feat, especially now when cheap energy deals are no longer available. But it’s worth seeing if there are some unnecessary expenses to tackle.”

Is it time to switch?

Ms Howard went on to highlight the potential savings many households could make by switching to new lenders and financial service providers.

“Are you paying interest on credit card debt, for example, when you could transfer the outstanding amount to a 0% balance transfer deal? Are you free to switch your better mortgage deal or reserve your next one (which you can do between three and six months in advance) before the next likely rise in interest rates?” she said.

“It could simply be that you are paying for services or features that you don’t use, such as on your broadband and TV deal, for example.”

“Any cash that’s being unnecessarily spent is always likely to find a welcome home, such as to fund life events and celebrations this year. But if it’s simply not available, the key is not to buckle under pressure and spend what you don’t have. Being creative and thoughtful with gift-giving can be a remarkably effective substitute that’s also often likely to be remembered for longer.”

Bank of England Announces Yet Another Hike in Interest Rates as Cost of Living Crisis Escalates

On Thursday this week (5 May), the Bank of England is expected to once again increase interest rates as the cost of living and inflation rates spiral out of control. The Bank of England is doing this in an attempt to stabilise the constantly increasing inflation rate. This rise will see a thirteen-year high in interest rates.

Rates are predicted to rise from the current rate of 0.75% to 1%, the highest seen since 2009. Due to the ongoing war in Ukraine, inflation is expected to continue to rocket with the rise in the cost of living, making it very difficult for many to deal with crippling financial responsibilities.

Members of the MPC (Monetary Policy Committee) have previously raised interest rates during the last three meetings in order to try and get inflation under control. Inflation currently sits at a 30-year high with a 7% inflation rate by the end of March, a far cry from the 2% target set by the Bank of England.

Things are expected to go from bad to worse with the predicted energy price cap revision due to be increased again later in the year. There is also a warning that inflation may, at the same time, rise to a worrying 9%, with some experts believing that it could actually reach double figures.

By raising interest rates when prices are increasing faster than wages, the Bank of England hopes that people are encouraged to save as opposed to borrowing. This tends to slow down the economy and, in turn, help bring down inflation rates.

With businesses and households being forced to tighten up on their finances, the growth of the UK economy is likely to suffer with the expectation that the Bank of England will further trim the economy on Thursday, according to the experts.

Investec economists said: “The UK is in the grip of the cost-of-living crisis. Coupled with tax rises, this leaves a rocky road ahead.”

The expectation from the experts at Investec is that we will be able to avoid a full-on recession. This is primarily due to many being able to save during the COVID-19 pandemic, but spiralling inflation and slow economic growth “leave the MPC in a bind”.

Investec has stated that they are predicting another hike in August from 1% to 1.25% but expect a pause after “assessing how big the effect of the real income squeeze on activity turns out”. More increases in 2023 are a very real possibility, with two more rises expected to be implemented.

February saw a sharp decrease in growth as the cost of living crisis really took hold. Official data released revealed that in February there was growth of just 0.1%, down from 0.8% seen the month before.

The Bank of England stated that it thought this year’s first quarter growth would sit at around 0.75%, which is higher than the expected GDP (gross domestic product), which was expected to remain flat.

Many experts, however, are predicting a flatlining of the GDP in quarter 2, as escalating prices further decrease consumer confidence.

Cost of Materials and Labour Spells Disaster for Self-Build Boom in the UK

It’s everyone’s dream to have a home built specifically for them. Designed with lifestyle and taste in mind, home builds have proved to be very popular over recent years.

More recently, spiralling inflation and shortages in materials and labour, alongside the war in Ukraine, have caused the costs of building a new home to skyrocket. With most of the most commonly used materials used for construction rapidly increasing in price, developing and building properties are set to take a downturn across Britain.

Neil Rogers of Honeywood Joinery, a carpentry business in Newcastle-under-Lyme, says: ‘I was told by my local merchants that if you’re pricing up a job and it’s longer than a month away, add another 15 to 20 per cent for more timber inflation.’

With the announcement from British Steel of a 25% hike in prices on some of their products, it isn’t surprising that developers and individuals are being more cautious when costing up development projects. Cement companies have reported an eleven per cent reduction in the production of cement, signifying a lowering in demand.

According to data from the National Federation of Roofing Contractors, around 60% of roofing firms have increased their charges.

Figures provided by the Department for Business, Energy, and Industry Strategy show that there has been a massive 21% increase in general materials in the last year. This data was calculated before the onset of the Ukraine war and the energy crisis, meaning prices can be expected to continue on an upward trajectory for some time to come.

So, whether you are doing a self-build or just a modest extension, price rises are sure to make your eyes water.

According to a price comparison site, roof tiles have risen by a whopping 24%, underfloor heating by 15%, and loft conversions by 20% over the last 12 months. Plywood is 44% more expensive, and uPVC has soured by 42%.

The most shocking of all price increases has to be for rolled sheet joists, which have risen by an unbelievable 82%.

Mike Fairman, the chief executive of Checkatrade, said: ‘The current global raw material shortage has had a profound impact on the UK trade and construction industry.

Soaring demand, the impact of Brexit, continued pandemic recovery, and shock factors like forest fires in North America are all reasons behind the shortages.

These massive increases are leading to a rapid decline in the growth of the self-build market. Analysis by estate agency Savills reveals that between 7 and 10% of all homes built in the UK are self-built, equating to around 130,000 per year. The government has plans to increase this to between 30,000 and 40,000 annually and has requested that councils keep a register of self-builders who are looking to purchase plots to develop. The aim is to use spare land that can be developed and offered to those on the register; however, the uptake has been somewhat patchy.

But dreams of your perfect self-build do not need to be forgotten necessarily. Instead, it is worth considering options to keep costs down to a minimum for new builds and extensions.

Getting quotes for labour and materials before the build starts will help to realistically cost the project. Also, bear in mind that the design may cause additional costs; for example, an open-plan design will most likely need load-bearing steel, which is one of the materials that has seen the largest price increase.

Purchasing an ‘off-the-shelf’ home will likely save you some money; in other words, considering a kit-built house is an option to keep costs down. The advantage of this is that buyers are paying a one-time payment for the design, including all the materials, fixtures, and fittings.

One bit of positive news is that the government has scrapped VAT for all materials intended to make homes and properties more environmentally friendly and energy efficient.

Landlords and Homeowners to Get Tax Relief to Improve Energy Efficiency

Following the Spring Statement this month by the Chancellor of the Exchequer, Rishi Sunak, landlords and homeowners were given the good news that all materials used for improving energy efficiency in their properties would now be VAT-free for the next 5 years, down from the previous figure of 5%.

This reduction in tax represents an estimated saving of £1,000 upfront and will further result in lower energy bills, saving around £300 per year per household. The announcement comes at a perfect time, particularly for landlords who are required to meet new EPC regulations to upgrade their properties and make them more environmentally friendly.

The new EPC (Energy Performance Certificate) regulations stipulate that landlords must increase the rating of their properties to the minimum of a C rating by 2025. This applies to all new tenancies and will be followed by all tenancies by 2028. This could add up to a large bill for landlords, who will be required to make any changes needed to reach the required rate, so the zero VAT on materials will help to keep costs down.

The 5% saving on materials will give landlords an opportunity to reduce their outgoings during periods when their properties are vacant and will in turn help tenants by reducing their energy costs, which will be gratefully received considering the recent increases in rental prices.

Rental rates have increased at their highest annual rate for more than five years, hitting the highest growth seen within the last year. The ONS (Office of National Statistics) has released data showing a 2.3% increase in prices in the private rental sector, the highest seen since December 2016.

The largest rental growth was recorded in the East Midlands, with an increase of 3.8%. London showed the lowest rental price hike, increasing only 0.2%, primarily due to the change in working habits, with many people opting to continue to work from home post-pandemic, according to the ONS. Excluding London, the rest of the UK saw rental prices increase by 3.2% in the last 12 months, up slightly from 3% in the year to January 2022. Looking at each individual country, Scotland leads the way with a rise of 2.6%, followed by England at 2.1% and Wales at 1.4%.

Research conducted by Rentd revealed that the average earnings of tenants fell far below the affordability level for rental prices across all regions of all five nations. This is calculated by looking at the average earnings of a typical renter and using a benchmark of two and a half times the average rental rates. The report found that the average annual wage for those who rent in the private sector was 12% lower than the wider average, with an average income of £28,116.

Across the UK, the average rental price is £968 per calendar month (£11,616 per annum). A tenant would need to have a salary of at least £29,041 to comfortably be able to afford this rental rate. This is a shortfall of £925 when calculating using the 2.5 times wage affordability formula.

With inflation spiralling and the cost of living rapidly increasing, many renters’ dreams of homeownership are becoming unreachable, putting even more pressure on the private rental sector to find more housing stock. The demand for quality, affordable rental properties is on the increase, with both landlords and tenants needing support through these turbulent times.