Equilibrium’s finance and investment news roundup 14-2-18

This week’s roundup includes news of increased calls for an urgent cap on energy bills, a rise in the number of landlords who are falling behind on mortgage payments, suggestions that the Bank of England could increase interest rates sooner than expected and the second monthly decline in UK house prices.

This week’s roundup includes news of increased calls for an urgent cap on energy bills, a rise in the number of landlords who are falling behind on mortgage payments, suggestions that the Bank of England could increase interest rates sooner than expected and the second monthly decline in UK house prices.

Cap on energy bills ‘needed urgently’

Plans by the government to place a cap on the cost of energy bills should be introduced urgently, a report from MPs has stressed.

The Business, Energy and Industrial Strategy Committee said a cap should be placed on the bills on a temporary basis and be fixed at an “absolute level”, rather than being set relative to other tariffs.

According to the committee, energy companies have taken “feeble steps” to avoid government action, adding that it was “underwhelmed” by the companies’ efforts to ensure prices were fair.

The committee’s report said legislation should be passed before the summer recess, which should allow the cap to be in place before the end of the year.

Rachel Reeves, the committee’s chair, said although the Big Six energy companies would likely “whine and wail” about the introduction of a price cap, “they’ve been overcharging their customers on default and standard variable tariffs for years and their recent feeble efforts to move consumers off these tariffs has only served to highlight the need for this intervention.”

Many landlords ‘falling behind with mortgage payments’

The number of landlords who are seriously behind with their mortgage payments has increased by 20%, data from UK Finance has revealed. According to the figures, there were 1,200 buy-to-let mortgages in “significant arrears” in the last quarter of 2017.

Representing a rise of a fifth compared to the same period of 2016, the findings have suggested that some landlords may be beginning to struggle financially following a series of tax changes.

There were also 5,100 buy-to-let mortgages in less serious arrears of 2.5% during the three-month period, which was a 2% rise on 2016.

The Association of Residential Landlords (ARLA) claimed the increasing length of time it takes to get a tenant evicted if they stop paying their rent was one of the biggest factors putting landlords under financial strain.

ARLA’s Chief Executive David Cox said: “Landlords are facing burden after burden placed on them by the government, which is significantly increasing financial compliance requirements.”

BoE ‘likely to raise interest rates sooner than expected’

The Bank of England (BoE) could raise interest rates sooner and by more than it anticipated only three months ago because Britain’s economy is getting a boost from the global economic recovery.

Rate-setters at the central bank gave themselves time to assess how Britain is coping with the approach of Brexit by voting unanimously to hold the Bank Rate at 0.5%, as expected last week.

However, Governor Mark Carney said there was a growing need to keep a grip on inflation, echoing other central banks moving towards tighter monetary policies a decade after the financial crisis.

Rate futures showed investors now predict a nearly 70% chance of a BoE rate increase in May, up from under 50% before the announcement last week.

The BoE said it wanted to return inflation to its 2% target over a “more conventional horizon”, which would mean limiting price growth within two years rather than three.

House prices fall ‘for two months in a row’

House prices in the UK have fallen for the last two months, according to Halifax. The UK’s largest lender said prices declined by 0.6% in January, following December’s drop of 0.8%.

The drop represented the first time since summer 2016 that prices have declined in two consecutive months. However, on a yearly basis, Halifax said the cost of homes had still risen by 2.2%.

Russell Galley, Managing Director of Halifax Community Bank, said although employment levels grew by 102,000 in the three months to November, household finances remain under pressure as consumer prices grow faster than wages.

He added: “It’s still too early to see any impact for first-time buyers from the abolition of stamp duty on purchases of up to £300,000, which was announced in the November Budget.”