In the 12 months running up to May 2021, there has been a Consumer Price Index inflation rise of a whopping 2.1%, according to the statistics provided by the ONS. The Bank of England’s target of 2% has therefore been breached, leaving speculation as to how the bank’s MPC (Monetary Policy Committee) will react. It is thought that a monetary policy adjustment will be needed, and it is expected that interest rates will rise.

When compared to May 2020, last month showed a CPI rise of 0.6% when compared to last year, which showed little to no change.

CPIH (including owner-occupancy housing costs) also showed a monthly increase of 0.5%, growing from 1.6% in April to 2.1% in May.

Of the largest contributors to the rise, the increased cost of fuel, clothing, recreation, and eating and drinking out has had a detrimental effect on CPIH 12-month inflation rates from April to May.

Associate Investment Director at Killick & Co., Rachel Winter, stated:

“The jump in UK inflation signals the hustle and bustle of life once more. Although the government is not progressing with the roadmap as previously promised, a clear vision of the country coming out of lockdown has boosted consumer confidence. Inflation has been driven by the rising cost of clothes, fuel, food, and drink.”

“With the United States exceeding inflation expectations as its consumer price index reached the highest levels since 2008, it will be critical to keep an eye on inflation here. Gradual inflation is beneficial, but having too much of a good thing too soon is not. If inflation becomes unmanageable, the Bank of England may be forced to raise interest rates much sooner than anticipated.”

Portfolio manager at Quilter Investors, Paul Craig, added:

“Inflation is on the up, breaching the Bank of England’s 2% target, yet it remains hesitant to respond by reducing the stimulus it has provided and the quantitative easing that has become so addictive for markets. For now, this is likely the correct decision, as we still expect much of the inflation feeding through to be transitory. Wage increases do appear to be coming through, but again, this data is so distorted by the furlough scheme that it can’t be seen as a reliable indicator.”

“Unfortunately, much of the inflation that is coming through is bad inflation, hitting lower-income households in the pocket. How long these price rises continue remains to be seen. Will inflationary pressures be self-defeating or resolved as pent-up demand dissipates or is met with increasing supply? But should it become sustained, then it risks making the recovery even more uneven than it already is, and thus, it will ultimately fall to the government to pull the fiscal levers as it continues its levelling-up agenda.”

“The data we are getting continues to be noisy and won’t return to normal for some time. Therefore, don’t be surprised to see things run hot for a period while the Bank of England assesses the impact. Investors will need to keep listening closely to the noises coming out of the central banks because, as soon as they hint at moving, markets will react quickly. This is why investing in quality businesses is so crucial right now. They are built to withstand multiple market environments and won’t necessarily be phased by spiking inflation and the impacts it could have on central bank decisions.”

Derrick Dunne, CEO of Beaufort Investment, commented:

“UK inflation continued its ominous climb in May, with the CPI reading surging year-on-year to 2.1%, up from 1.5% in April, beating analyst expectations and, crucially, breaching the Bank of England’s 2% target for the first time since 2018.”

“Clearly, an impressive economic recovery is coming. Today’s data once again indicates a promising rise in consumer demand, largely driven by the easing of restrictions and a hearty embrace of the return to hospitality: the strongest upward contributions in May came from transport, clothing, food, and recreation.”

“But the Bank of England may soon have to take tightening measures. Let’s not forget a few years ago when it started cautiously raising the base rate in the face of a post-Brexit inflation surge.”

“That being said, the latest delay to our so-called ‘Freedom Day’ and the impending end of the furlough scheme should temper price rises in the short term, but the breach of the Bank’s stringent 2% target may already be provoking discussion of a monetary policy adjustment. Investors should still ensure that their plans can withstand both inflationary pressures and a potential rise in the base rate. At this stage, nothing is off the table.”

In March, the Royal Institution of Chartered Surveyors (RICS) issued new guidance that was supposed to help up to half a million leaseholders sell or remortgage their flats. The guidance was introduced to enable surveyors to establish if extra fire safety checks were needed for tower blocks.

Unfortunately, an investigation conducted by the BBC Money Box has found that the guidance is still being ignored by many lenders. Consequently, many leaseholders are still finding themselves in positions where they are unable to sell or remortgage their flats, despite there being no specific safety issues of concern.

In the wake of the Grenfell Tower tragedy that resulted in 72 deaths, the RICS introduced the Exterior Wall System or EWS1. The purpose of this form is to offer formal assurance to sellers, buyers, and lenders that a flat is safe to sell, buy, or lend against. Vertically stacked balconies, flammable cladding, and other potential fire risks are assessed in order for the surveyor to reach a decision on the property’s safety.

But even where a flat does not need an EWS1 form in full accordance with RICS guidance, some lenders are declining applicants for not having one.

Trapped by bureaucracy

BBC Money Box interviewed leaseholder Jie Shen, who said that his retirement plans are now in jeopardy due to his inability to sell his flat.

Despite RICS guidance clearly indicating that his flat does not need an EWS1 form, prospective buyers interested in his property have now been declined by three separate mortgage providers on this basis.

“I feel like I’m trapped in this situation. I can’t move on with my life; I’m just locked into this, and I don’t know how to resolve it,” he said.

“I think the mortgage lenders should follow the advice from RICS and shouldn’t insist on an EWS1 form [for a building] that does not contain flammable cladding.”

“I just don’t understand why the mortgage provider insists on this—it’s just bureaucracy.”

Jie also commented on the fact that an EWS1 form is not something he is personally authorised to do, as responsibility lies with the freehold owner of the building.

Government intervention is required

In response, MP Clive Betts has written to the government to ask why a complete disregard for the guidance issued is being tolerated on a widespread level.

Mr. Betts penned his letter to the Secretary of State for Housing, Robert Jenrick, demanding information in two key areas:

• The ways in which the government is supporting the implementation of the new guidance from RICS.
• The actions that the government plans to take in the event that mortgage lenders continue to insist that EWS1 forms are obtained for buildings that do not meet RICS criteria.

“The system was set up with the lending industry and the surveying industry to work together to give reassurance to lenders. That is its whole purpose,” Mr Betts said in an interview with BBC Money Box.

“So if it isn’t giving reassurance to lenders to lend on buildings that the system says don’t need a certificate… then the system is a complete failure, and it needs taking up with both RICS and the lenders, so it doesn’t leave people stranded in homes that they can’t sell and can’t remortgage.”

Most major and minor renovations can make a positive contribution to the market value of any home; the extent to which home improvements influence property values varies significantly from one property to the next.

There are several significant home improvement projects that are known to contribute significantly to market values in the current climate. If you are looking to sell your home for the best possible price, irrespective of its location, these are the renovations worth considering right now:

Cellar conversions

Even a relatively rudimentary cellar conversion to create an additional room can boost the market value of a home by as much as 30%. If you have a relatively spacious cellar that could be converted into a comfortable shared living space, it could make a major contribution to the market value of your home.

Garage conversions

The same also applies to garage conversions, where the renovation results in a fully functional additional living space for the property. A converted garage can be used to set up a home office, a home cinema, a game room, or a guest bedroom. It can also be a surprisingly affordable project if the existing structure of the garage is relatively sound.

Loft conversions

A loft conversion can be carried out to create additional storage space, add an extra bedroom to the property, or create a quiet and secluded haven for relaxation. On average, it is estimated that a loft converted into a functional living space can boost the value of a home by around 15%.

Conservatory construction

The installation of a conservatory almost always boosts a home’s value far beyond the associated construction costs. Exact values vary from one installation to the next, but a typical conservatory will boost a home’s value by at least 10% on average.

Driveways

Even something as simple as a functional yet attractive driveway is known to significantly boost curb appeal for prospective buyers. Where a property does not have a private garage, a driveway is the next best thing.

Kitchen extensions

A kitchen renovation can be a great way of boosting the value of a property, but not nearly on the same level as a kitchen extension. As the kitchen is considered the heart of the home by most would-be buyers, it is often scrutinised more intensively than all other living spaces. Expanding a compact kitchen with a modest extension is guaranteed to boost the value of the property as a whole.

Bathroom updates

Last but not least, a bathroom makeover can also make a real difference. This also tends to be a space that is heavily scrutinised by prospective buyers, resulting in a renovation that almost always pays for itself with its subsequent contribution to the market value of your home.

The latest figures from Nationwide suggest that not only is the UK housing market bouncing back, but demand for homes in key areas of the country is higher than it has been in some time.

Over the course of the past year, average UK property prices have increased by as much as 7.1%. Nationwide’s newly published report subsequently suggests that UK house prices are now averaging £238,831, up almost £16,000 from the same period last year.

Analysts have labelled the events of the past 12 months a double-edged sword of sorts for prospective buyers. Many first-time buyers amassed significant savings during lockdown, enabling them to more comfortably cover deposit requirements on planned purchases. But at the same time, a growing lack of affordable properties is seeing prices rapidly increase.

Speaking on behalf of James Pendleton estate agents, Lucy Pendleton commented on what could prove to be an extraordinary few months for the UK housing market.

“This market is on the boil,” she said.

“Silly season might be just around the corner. That’s when a seller’s market becomes entrenched against a backdrop of very high demand, and you start to see open houses for properties that are nothing special and a return of gazumping.”

A steep monthly rise in house prices

The figures published by Nationwide also showed a significant spike in property prices between March and April, increasing a further 2.1%. The pace at which property prices are increasing has accelerated over the course of the last year, driven partially by the stamp duty holiday extension in England, Wales, and Northern Ireland.

In addition, movers and first-time buyers across the country are setting their sights on more spacious homes away from busy urban centres.

Robert Gardner, chief economist at Nationwide, believes that this may be an even bigger motivator than the stamp duty savings available for those who act fast.

“Our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people, it is not the key motivating factor prompting them to move in the first place,” he said.

Analysts expect average house prices to continue growing for the foreseeable future, putting a further drain on the already limited supply of affordable homes available. This is unlikely to come as welcome news for first-time buyers, but the reintroduction of the 95% LTV mortgage could help thousands take their first step on the property ladder.

“The fact that around a third of first-time buyers in England in 2018-19 said that friends or family helped them to raise a deposit through a loan or gift suggests that the recent surge in savings will help some, but that the impact won’t be spread evenly,” Mr. Gardner commented.

He also highlighted the possibility of a significant slowdown later in the year if unemployment projections for Q3 and Q4 prove accurate.

Demand for spacious family homes in North West London apparently knows no bounds, with a large uninhabitable property having sold this week for £500,000 more than its asking price.

Three families with their sights on the home in St. John’s Wood entered into a bidding war, ultimately resulting in the dilapidated property selling for a huge £6.25 million.An impressive price in its own right, made all the more remarkable by the questionable condition of the property and its surroundings.

Speaking on behalf of Arlington Residential estate agents, Marc Schneiderman said that the price the property fetched represented further evidence of pent-up demand being unleashed on the housing market in the wake of three consecutive lockdowns.

“The appetite for family houses in North West London is often underestimated by people who feel that the events of the past 12 months have suppressed the sales market,” he said.

“This really could not be further from the truth, with demand currently far outstripping the availability of houses for sale.”

Mr. Schneiderman also stated that bidding wars between two or more buyers have occurred in at least 70% of his agency’s property sales over the past six months.

An ambitious renovation project

The property itself is currently in an uninhabitable condition throughout, though it has remarkable potential as a long-term renovation project.

Located in a desirable corner of St. John’s Wood, the distinctive detached property provides 7,074 square feet of living space, including eight bedrooms, seven reception rooms, six bathrooms, an artist’s studio, and a family kitchen.

According to Arlington Residential, each of the families bidding for the property is local to the St. John’s Wood area and intended to purchase the property for private occupation, not to renovate and resell.

The estate agent also emphasised the growing popularity of the local residential marketplace in and around St. John’s Wood, which is among London’s most active real estate markets for larger detached and semi-detached houses with private gardens.

A major shift in priorities among movers and first-time buyers during the COVID-19 crisis has seen attention move away from compact urban dwellings towards larger homes in less populated corners of the capital.

Private parking, space for home work, and outdoor living spaces are prioritised by more homebuyers than ever before, reflecting the new trend of working from home and spending more time at home than ever before.

Nationwide’s latest house price index indicates a small slowdown in annual house price growth for March, reflecting a temporary drop in demand in the run-up to the original stamp duty holiday deadline. Annual house price growth was 6.9% in February, slowing slightly to 5.7% in March.

Northern Ireland was the strongest performer in the UK throughout the first months of the year, achieving annual house price growth of 7.4%. Scotland and Wales saw growth of 6.9% and 7.2%, respectively, followed by England with Q1 annual price growth of 6.4%. This is down slightly from the 6.9% recorded in Q4 2020, which came as little surprise to the vast majority of market watchers.

The figures from Nationwide also highlighted a series of regional disparities, with the Northwest having achieved the strongest annual house price growth of 8.2%. As predicted by many, London’s performance was the poorest of all in the regional rankings, with annual price growth falling from 6.2% in Q4 2020 to 4.8% in Q1 this year.

A buoyant six months ahead

Commenting on the figures, Nationwide’s chief economist said that the slowdown was to be expected and that the sector is anticipating a strong spring and summer season.

“Given that the wider economy and the labour market have performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget,” Robert Gardner said.

“Recent signs of economic resilience and the stimulus measures announced in the Budget, including the extension of the furlough scheme and the stamp duty holiday, as well as the introduction of a mortgage guarantee scheme, suggest that housing market activity is likely to remain buoyant over the next six months.”

“The longer-term outlook remains highly uncertain. It may be that the recovery continues to gather momentum and that shifts in housing demand resulting from the pandemic continue to lift the market. However, if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.”

His sentiments were echoed by SPI Capital chief executive Anna Clare Harper, who suggested that many current home buying trends are likely to perpetuate throughout the year.

“This slight slowdown reflects the originally proposed end to the temporary stamp duty reduction and practical restrictions: Christmas, then lockdown, which reduced people’s ability to transact. Yet people want to buy while stamp duty is reduced,” Ms. Harper said.

“Stamp duty has a more than proportionate impact on transactions because affordability is heavily influenced by mortgage lending. Investors and homebuyers can borrow against the property price, but they cannot use finance to fund transaction costs.”

“Reduced stamp duty has not been the only driver of house price growth over the last year. We also have cheap debt as a result of very low interest rates, which give buyers a ‘discount’; the release of pent-up supply and demand and the desire to improve surroundings amongst existing homeowners; and the ‘flight to safety’, since in times of uncertainty, people want to put their money in a stable asset with low volatility. These trends are likely to hold up throughout 2021.”

From brokers to banks and everything in between, those who work in the financial sector tend to be pretty savvy with sector-specific jargon. With the public, it is often an entirely different story.

More consumers than ever before are taking an active interest in their finances, but they often admit that a lack of specialist industry knowledge can be daunting.

For the benefit of those within the sector, Uswitch recently conducted a survey involving just under 4,000 Brits. Their aim was to find out which financial terms are most confusing for the average UK citizen, which brought to light some interesting findings.

The following may therefore prove useful for brokers and financial service providers, who are likely to encounter customers unfamiliar with this terminology.

‘Blended finance’ and ‘cornerstone investment’ top the table

Right at the top of the rankings in terms of lack of understanding, the survey from Uswitch found that just 4% of people were familiar with the terms ‘Blended Finance’ and ‘Cornerstone Investment’. The rest had no idea what either referred to.

Next on the list came’social enterprise’ and ‘Fintech’, both of which were recognised and at least partially understood by 13% of respondents. The lack of understanding with ‘Fintech’ in particular proved interesting, given how ‘Financial Technology’ refers to various everyday consumer staples like mobile banking.

While bridging finance activity in the UK may be hovering at an all-time high, just 14% of respondents were familiar with the term ‘bridging loan’ and the fundamentals of how bridging finance works.

Slightly further down the list came ‘CHAPS’ and ‘Hedge fund’, both of which were familiar to around 18% of respondents, while ‘annuity’ followed closely behind, with 20% of people saying they know what it refers to and how annuities work.

Despite the fact that most of those taking part in the survey are likely to have savings accounts, only 23% knew that ‘AER’ refers to and means the ‘Annual Equivalent Rate’ applicable to a savings account.

This was followed in the rankings by ‘Equity Loan’, understood by just 27% of respondents.

The most widely recognised and understood financial terms

At the opposite end of the table, the Uswitch survey also revealed which financial terms are most widely understood by the British public.

At the top of the rankings was ‘Pension’ with a score of 78%, though this suggests that a worrying 22% of Brits do not understand what a pension is or how it works. ‘Interest rates’ followed closely with 76%, though again, this suggests that 24% of respondents are unfamiliar with what interest rates are.

An impressive 73% of respondents were familiar with ‘Crowdfunding’, which has become a popular activity for funding innovative projects over the last few years. 71% of respondents understood the term ‘credit score’ and its meaning, while 68% were familiar with what an ‘ISA’ is.

Slightly further down the rankings, ‘Investing’ achieved a score of 64%, followed by ‘Stock’ at 61%. ‘Net worth’ was also a relatively widely understood term, with a score of 59% in the survey, followed by’repossession’ with 56% and ‘depreciation’ with 55% of respondents.

The report from Uswitch also revealed that the most commonly searched-for financial term online (by monthly average) was ‘stamp duty’, with around 7,300 people per month using the search term ‘what is stamp duty?”