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Equilibrium’s finance and investment news roundup

This week’s roundup includes the promise of a £10 billion funding injection to help more people onto the property ladder, predictions of a rise in UK interest rates, a fall in London property prices and an unexpected rise in consumer confidence.  

Prime Minister pledges £10bn Help to Buy boost  

The government has promised to inject an additional £10 billion into the Help to Buy scheme in a bid to help more people onto the property ladder. Confirming the move on BBC One’s Andrew Marr Show, Prime Minister Theresa May said the plans would be outlined in the Budget on 22nd November.  

It is hoped that the extra funding will help prospective homeowners to get a mortgage with as little as a 5% deposit on newly-built homes, but no detail has beengiven as yet about where the money will come from.  

News of the additional funding comes amid recent falls in home ownership. According to the Department for Communities and Local Government, some 62.9% of the estimated 22.8 million households in England were held by owner-occupiers in 2015-16, down from 70.9% in 2003.  

The Help to Buy scheme was introduced in its first phase in April 2013 in England, in which buyers looking at new-build homes worth up to £600,000 were offered a 20% equity loan from the government.  

Interest rates could rise in ‘relatively near term’  

The Governor of the Bank of England has suggested that interest rates could rise in the “relatively near term”. Speaking to the BBC, Mark Carney said that it was time for the bank to “ease its foot off the accelerator” in the clearest indication yet that there could be a rate rise as early as November.  

Also warning against “reckless” household borrowing, Mr Carney said that although overall lending to consumers in the UK had decreased considerably since the financial crisis, there was the potential for danger due to “frothy” growth in some areas of property lending.  

Speaking to Radio 4’s Today Programme, Mr Carney said that banks had “not been as disciplined as they should be” in some areas, adding: “What we're worried about is a pocket of risk - a risk in consumer debt, credit card debt, debt for cars, personal loans.” 

The next opportunity for a change in the UK’s interest rates will come at the Bank of England’s next Monetary Policy Committee meeting on 2nd November.  

London house prices ‘decline for first time in eight years’  

House prices in London have fallen for the first time in eight years, according to new data released by Nationwide. According to the lender, the value of homes in the capital dropped by 0.6% year-on-year in September.   

Previously, London property prices had fallen in the centre of London, but up to now buoyant prices in the suburbs have kept prices rising across the city as a whole. Robert Gardner - Nationwide’s Chief Economist - said the decline in house prices was “particularly marked”.  

Outside London, prices continue to rise in every area, with the East Midlands seeing the most pronounced increase of 5.1% during the 12-month period. For the UK as a whole, Mr Gardner said low mortgage rates and growing employment were supporting demand.  

The average price for a house or flat across the UK now stands at £210,116.  

Consumer confidence ‘reaches four-month high in September’ 

Confidence among British consumers reached an unexpected four-month high in September, despite widespread worries about the state of their personal finances. This is according to a monthly survey from market research firm GfK, which saw its monthly consumer sentiment index rise to -9 in September, from -10 the previous month.  

GfK said morale among consumers increased for the second month in a row, although still remained lower than levels set out before Prime Minister Theresa May lost her parliamentary majority in June.  

Joe Stanton, GfK’s Head of Market Dynamics, said: “Consumers are still spending out there and have repeatedly defied predictions of a downturn since last year’s Brexit vote.” 

The value of the pound plunged following the UK’s decision to leave the European Union last year, which pushed up inflation. The weak pound has put further pressures on household budgets across the UK.  

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