Your February update from AMI Chief Executive Robert Sinclair

AMI Chief Executive Robert Sinclair gives his February update, discussing the latest issues in the industry and how we can tackle them…

Tackling barriers: The Protection Gap

AMI Senior Policy Adviser Stacy Penn discusses the Perception Gap in the protection market, in this article originally published in Moneyfacts…

The FCA in the insurance space – a more assertive regulator?

Following introduction of Consumer Duty, we have seen signs the FCA is shifting towards becoming a more assertive regulator…

The Perception Gap

AMI Senior Policy Adviser Stacy Penn discusses the findings from AMI’s latest Protection Viewpoint – The Perception Gap, in this article written for TMA Club…

Consumer Duty: The next steps – what does 2024 have in store?

On 6th December 2023, the FCA hosted a webinar titled Consumer Duty: The next steps – we draw out the key points of relevance to mortgage intermediary firms…

Your January update from AMI Chief Executive Robert Sinclair

AMI Chief Executive Robert Sinclair gives his January update, reflecting on the challenges and opportunities of the year ahead…

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As Brexit now assumes inevitability, we are beginning to see firms that need a European trading hub deciding where they will relocate some core activities. They will delay transfer as long as possible in case deals are agreed, but without unfettered trading access we will see job losses in the UK and adverse impacts on GDP over the medium term. Firms will also be making investment decisions against a volatile backdrop as we secure our divorce, meaning that we are likely to see a less positive environment.

Whatever the amount we have to pay to meet our existing obligations, it will be money leaving the country, as opposed to the investment agreed on Northern Ireland. Whatever one thinks about austerity, the money tree and our problem funding the resolution of our high rise housing issue, world economists have suddenly turned against government asset purchase and quantitative easing schemes. Government is therefore looking into an abyss. The pressure to begin to scale these back is escalating as “herd think” amongst economists grows. The only way to resolve this may be by more taxes, which would play to the Corbynista agenda.

We do have a southern property asset bubble that is only affordable with continued strong employment and low interest rates. Moreso much of the underpin of foreign investment looks less likely with ever weakening sterling. Despite the fact that our European neighbours need our trade as much as we need theirs, it is politicians wedded to the great European experiment that are negotiating the exit deal, not bankers or industry leaders.

Against this background we are at a strange point in the economic cycle. Rising price inflation, challenges to GDP, low wage inflation, high employment and low unemployment, very low interest rates, weak sterling and aggressive intervention in the housing markets.

The three pronged attack on people using residential property as a personal investment class has only just begun. The stamp duty hike has been absorbed. The income tax changes will have huge escalating impact over the next five years as investors recognise the impact on their profitability and cash flow and chose to exit or restructure. The portfolio rules yet to advance will be another tool to redefine this market as it will ensure clarity on the extent of the income tax changes arriving. A very neat pincer movement, executed without fanfare. With rising interest rates those with highly geared portfolios will have significant challenges.

All of this when government has to look at whether to extend Help to Buy, which appears to be the bedrock for builders feeling confident in starting new scheme builds. Without this then there is the risk that housing starts will fall back. The new policy of affordable starter homes now appears to be the favoured instrument. The issue here is agreement on how the 20% discount will work and how it will be valued initially and on re-sale. Lenders and surveyors need more certainty on this before they will lend to an agreed value on this product. Indeed mortgage brokers will need to understand before encouraging borrowing on such properties. We do not need another group of property or mortgage prisoners because we have not worked out all the angles at the start.

It will be dangerous to assume a continuing escalation in house prices over the medium term, as there are enough cross-winds set out in this article alone to recognise that a period of stable or gently falling prices is quite likely.

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