One year ago Coreco made our annual predictions in a much more uncertain time than we seem to be in now. With the Olympic hangover still stubbornly aching we reflected that actually, our 2012 predictions were, in sentiment terms at least, not at all bad.
For 2013 we felt “cautiously optimistic”, we have had a few false dawns before, with all the talk of Funding for Lending and a clutch of new policy initiatives to try to help the beleaguered housing market and get lenders to lend.
So we thought that house prices would rise by at least 3%, Bank of England Base Rate would stay at 0.5%, mortgage lending would hit the £158 billion level, (quite a jump from 2012) and the FTSE would break 6,300 and work towards the 6,500 level.
Not bad all in all and once again the sentiment was bang on, making some of the predictions by some other “economists” look a little out. That is however to be expected, as I have long said that economics seems to be more of an art than a science.
Whilst the usual harbinger’s of doom were wrong again, (for example those who predicted a house price fall), for me these economists fall in to three main camps. First the ones who have a reason to lead thought in a particular way for their own gain, an “in-house” message with stats used to prove their direction.
Second, those who truly believe in what they think will happen. This usually follows a strong political belief or those academic economists with proper qualifications gained over many years.
Finally the contrarians and those who say things just to get noticed – “sound-bite economics” if you like.
Although, there are also those of us who work in the industry, have written about it for the last 10 years and just try to provide some sort of guide based on what we are seeing, hearing and reading. Personally I don’t hold much store with the “I told you so” brigade, especially in this field where unforeseen events can change things so dramatically. Predict something long enough and it is bound to happen sooner or later!
To be fair, all of them have a right to express opinion and it is good for healthy discussion, the truth laying somewhere in the middle.
So where are we now?
It certainly feels like we have come a long way since the close of 2012 and once 2013 got into full swing there was no turning back.
We have seen Help To Buy Parts 1 and 2, the return of higher LTV mortgages, the beginning of the end of Funding for Lending, interest only declining further, thousands of mortgage criteria changes causing us to both bang our fists on the table and give a small whoop of joy.
Whilst the Buy to Let and the remortgage markets have strengthened, we stand on the cusp of the Mortgage Market Review with the FCA making a decent fist of getting a grip on things. Legacy issues still remain however, with more banking issues from drug toting Chairmen and dodgy incentive schemes to banks being accused of deliberately bringing down small businesses and fines galore.
Meanwhile Carney swaggered in through a haze of Superstardom and gave us Forward Guidance, mainstream lenders have started to come back into the High Net Worth market, challenger banks have challenged and new arrivals seem to be lining up to enter the market.
House price wise there have been more bubbles than in your average bar of Aero, we are either deep in one, about to get into one, a 77% chance of being in one or nowhere near one dependent on which economist you care to listen to on any given day.
Meanwhile London continues to act however it pleases, not really giving a toss about anyone’s’ theories; Bitcoins nudged even the price of gold, then promptly plummeted, the FTSE has rallied and the UK looks well set on a path to recovery whilst even the Euro has become eerily, (some say worriedly), quiet for a while.
2014 looks like another interesting year.
Like last year we will release our predictions in four main parts over the coming weeks in detail, but for now; house prices rising a further 5% – 8%, (potentially dropping back in 2015); Bank Base stable at 0.5% for most of the year (maybe a twist towards the end of the year), mortgage lending almost touching the £200 billion level and the FTSE potentially hitting a record high at 7,000 seems fair.
As ever, my favourite economic term always applies; ceteris paribus!
Whatever transpires, we wish you all a very happy, healthy and prosperous New Year.