The Briefing on Wednesday 14th March 2018
In this edition of The Briefing from Informed Choice on Wednesday 14th March 2018 – inflation basket update, remortgages reach nine-year high, Prudential to demerge, small change for the chop, and Google bans bitcoin ads.
Inflation basket update
The Office for National Statistics has made several changes to the goods and services included within their inflation basket. Added to the notional basket are women’s leggings, chilled mashed potato and raspberries. Removed from the basket are pork pies, Edam cheese and camcorders. A review of the inflation basket takes place one a year, to keep the goods and services measured relevant for the British consumer. The ONS then uses price changes to the 700 items in the basket across 20,000 UK outlets in order to calculate changes to price inflation.
Remortgages reach nine-year high
The number of remortgages in January reached a nine-year high while the number of first-time buyers and home movers both increased compared to the same period in the previous year. This is according to UK Finance’s latest mortgage trends update. There were 49,800 new homeowner remortgages completed in January 2018, 19.1% more than in the same month a year earlier. This is the highest monthly number of remortgages since November 2008, when the figure stood at 51,300. The £8.9bn of remortgaging in January 2018 was 20.3% more year-on-year.
There were 24,500 new first-time buyer mortgages completed in January 2018, 7% more than in the same month a year earlier. The £4bn of new lending in the month was 11.1% more year-on-year. The average first-time buyer is 30 and has a gross household income of £41,000.
Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance said:
Remortgaging in January reached a nine-year high, as a number of fixed rate mortgages came to an end while borrowers locked into attractive deals amid expectations of further interest rate rises. While an increase in remortgaging is expected in the New Year as people put their household finances in order, this strong growth is above the seasonal fluctuations we tend to see at this time of year.
There was the usual dip in both first-time buyers and home-movers post the December festive period, but mortgage lending in both segments increased compared to the same period in 2017. However, growth in the buy-to-let market remains subdued, reflecting the ongoing impact of recent tax and regulatory changes.
Prudential to demerge
Insurance giant Prudential has announced plans to demerge investment manager M&G from the group. They also plan to sell their £12bn annuity portfolio. The life insurer announced it will demerge its UK and Europe business from Prudential, resulting in two separately-listed companies with “different investment characteristics”. Shares rose more than 4% in early trading following the news.
Mike Wells, Prudential group chief executive, said:
Following separation, M&G Prudential will have more control over its business strategy and capital allocation. This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe through two of the financial sector’s most trusted brands, while Prudential plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.
Small change for the chop
The government could remove 1p and 2p coins from circulation, as well as getting rid of £50 notes. The hint came in documents with yesterday’s Spring Statement, with the Treasury calling for evidence around the use of cash and digital payments. It follows a rise in the use of contactless and digital payments, with the document saying there has been a “much more significant decline in the use of cash for transactions that are less than £5 compared to higher-value transactions”.
Up to 60% of 1p and 2p coins are used only once before leaving the cash cycle; being saved in a jar at home or, in around 8% of cash, thrown away. The paper says:
At the other end of the denominational scale the £50 note is believed to be rarely used for routine purchases and is instead held as a store of value. There is a significant overseas demand for £50 notes, with the notes used for some transactions, but mainly held as a store of value alongside other currencies such as the dollar and euro.
There is also a perception among some that £50 notes are used for money laundering, hidden economy activity, and tax evasion.
Google bans bitcoin ads
Google has announced a change to its advertising policy which will result in cryptocurrency adverts being banned from June. The firm indicated in a blog post it will change its existing financial product restriction list to blacklist ad content “including but not limited to initial coin offerings (ICO), cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice.” The ad ban will apply to Google’s proprietary and affiliated advertisement platforms.
It follows a similar move last month by Facebook, banning advertisements for bitcoin and initial coin offerings, in order to prevent ads which may deceive investors.
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