British mortgage approvals dropped in July on the previous month when buyers were rushing to complete deals to beat the stamp duty holiday deadline, with consumers making a "rare" net repayment on home loans.
British lenders approved 75,152 loans last month, a drop of 6.4 per cent from the 80,272 recorded in June – the lowest level in a year, according to Bank of England data.
Consumers repaid £1.4 billion of mortgage debt on net in July, only the second time in the past decade that repayments have been bigger than borrowing after a record £17.7bn of net borrowing the previous month.
“Net repayments are relatively rare, with only one other repayment [in April 2020] in the past decade,” the BoE said.
“The net repayment in July followed record borrowing in June, which was probably boosted by the initial tapering off of the stamp duty holiday. Gross lending fell to its lowest since June 2020, at £16.5bn. Gross repayments were a little below the twelve month average, at £18.1bn.”
July was the first full month after the stamp duty holiday was tapered off on June 30, but the approval rate “remains above pre-February 2020 levels”, the BoE said.
The nation is waiting to assess whether the housing market will fall off a cliff after the end of the stamp duty holiday, said Laura Suter, head of personal finance at AJ Bell.
"July’s data suggests the market may be slowing, with £1.4bn of net repayments of mortgage debt in the month," she said.
“However, while mortgage approvals for future purchases fell a bit in July, they are still above pre-pandemic averages – showing signs that the market may remain fairly buoyant. And with the interest rates on mortgage borrowing dropping again, it’s likely that record low rates could keep the market afloat yet.”
The shift in mortgage borrowing in July reflects a drop in residential property sales, with the number of transactions falling 61.5 per cent in July to 82,110 deals on a non-seasonally adjusted basis from 213,120 in the previous month, according to the Office for National Statistics.
UK house price growth also cooled in July, growing at its slowest rate since March, according to the latest Halifax house price index showed, in a signal that tapering the stamp duty holiday has taken momentum out of Britain’s red-hot property market.
Under the tax incentive programme introduced by Chancellor of the Exchequer Rishi Sunak in July last year, the first £500,000 of any property purchase in England or Northern Ireland was exempt from stamp duty until the end of June. Similar measures were offered in Scotland and Wales.
A £250,000 tax-free allowance will expire on September 30 in England and Northern Ireland.
British consumers also curbed their borrowing in July, with borrowing dipping by £42m, the weakest performance since February this year when England was enduring its third coronavirus lockdown, with similar restrictions across the rest of the country.
The UK was hit by a surge in Covid-10 case in July, while a drop in business activity was caused by staff shortages and supply chain challenges aggravated by the spread of the Delta coronavirus strain, as well as strict self-isolation rules which have since been relaxed.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
More on Yemen's civil war
Moral education needed in a 'rapidly changing world'
Moral education lessons for young people is needed in a rapidly changing world, the head of the programme said.
Alanood Al Kaabi, head of programmes at the Education Affairs Office of the Crown Price Court - Abu Dhabi, said: "The Crown Price Court is fully behind this initiative and have already seen the curriculum succeed in empowering young people and providing them with the necessary tools to succeed in building the future of the nation at all levels.
"Moral education touches on every aspect and subject that children engage in.
"It is not just limited to science or maths but it is involved in all subjects and it is helping children to adapt to integral moral practises.
"The moral education programme has been designed to develop children holistically in a world being rapidly transformed by technology and globalisation."
