Britain’s mortgage approvals fell sharply in October as activity in the housing market eased following a rush earlier in the year caused by the stamp duty tax holiday.
Lenders sanctioned 67,199 mortgages last month, down from the 71,851 in September and the lowest level since June 2020, according to Bank of England data, while net borrowing lending dropped from £9.5 billion ($12.7bn) to £1.6bn.
“October’s decrease was driven by borrowing brought forward to September to take advantage of stamp duty land tax relief, before it was completely tapered off,” the Bank of England said.
“The net borrowing in October was £4.6bn below the 12-month average to June 2021, when the full stamp duty holiday was in effect.”
The lower approval figures indicate a cooling-off period for the market after buyers rushed to complete deals before the first stamp duty holiday deadline on June 30, which offered them a saving of up to £15,000 on the first £500,000 of a purchase.
The tax break, rolled out in July last year to bolster the market during the pandemic, was then tapered down to the first £250,000 of a purchase until it ended completely on September 30.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the drop in net mortgage borrowing was “not surprising” considering the flurry of activity in September before the stamp duty deadline.
“With house purchase numbers falling, although still close to the 12-month average the market is settling down a little after what has been a frenzied few months,” he added.
This year is set to be the UK's busiest housing market since 2007, with one in 16 houses changing hands in 2021, according to property firm Zoopla.
The company’s House Price Index shows strong buyer demand as a result of the coronavirus pandemic, which has boosted the average value of homes in the country to £240,000, from £200,000 five years ago.
Over the past 12 months alone, average UK prices have risen by £15,500, with south-east and south-west England recording increases of more than £22,000.
The annual rate of growth for all homes is 6.9 per cent, up from 3.5 per cent in October 2020, Zoopla said, a slight fall from the 7 per cent increase recorded in August and September 2021.
Meanwhile, UK consumers took on unsecured loans at the fastest pace since the aftermath of the first lockdown, adding to signs that people are becoming more willing to spend.
Consumer credit rose £706 million in October, with borrowing on credit cards accounting for almost all of the increase, tallying with strong retail sales during the month.
The data suggest consumer confidence remained buoyant in October, which may reassure BoE policymakers that the economy is strong enough to cope with an interest-rate increase next month.
Bethany Beckett at Capital Economics said while the rise in consumer credit in October adds to evidence that economic activity fared well at the start of the fourth quarter, “that no longer offers much comfort in light of the discovery of the new Omicron variant.
“While much remains uncertain, the risks to our already subdued [gross domestic product] forecast appear to the downside,” she added.
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.”
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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."
