Mexico Sees Small Inflation Impact From Tariffs On Chinese Goods

Source: reuters

First-time buyers are taking out larger mortgages than ever before as rising wages and looser affordability tests allow them to buy properties that were previously beyond their budget.

The average first-time buyer borrowed £210,800 in the year to September, a record high, according to analysis by Savills, the property agent.

First-time buyers accounted for 20% of all spending in the UK housing market in the 12-month period, which is the highest level since at least 2007, it added.

This effect is even more pronounced in places such as London, with separate research from the estate agent Hamptons revealing that first-time buyers made more than half of all purchases in the capital this year.

In total, Savills said mortgage lenders loaned a record £82.8bn to 390,000 first-time buyers in the period, a 30% increase on the previous year.

The larger mortgages come as some first-time buyers skip the traditional first rung of the property ladder and buy a house rather than a flat. The average age of a first-time buyer is 34, according to the Mortgage Advice Bureau, while 31% have children by the time they get on the property ladder.

Many first-time buyers also took advantage of the stamp duty holiday, which let them pay no tax on the first £425,000 of a property's value, to buy a larger home. This limit dropped back down to £300,000 in April. They also benefited from a "buyer's market", with prices falling in some parts of the country.

Lucian Cook, the head of residential research at Savills, said a significant driving force behind the record borrowing had also been the "slightly more relaxed approach" of lenders.

"Home ownership is more accessible now than at any point in the last three years, thanks to lower borrowing costs, lower real house prices, and more accessible mortgage debt," he said.

Mortgage lenders typically do not lend more than 4.5 times a borrower's income and also consider whether someone could still afford repayments if interest rates soared, in a check known as "stress tests".

However, in March the Financial Conduct Authority said that the way some lenders were conducting their stress testing "may be unduly restricting access to otherwise affordable mortgages". It reminded lenders that companies have "flexibility to design their test in a way that is appropriate" for their customers.

Since then, most lenders have reduced the interest rate at which they stress test borrowers, with most first-time buyers now able to increase their borrowing by £20,000-£40,000.

The relaxation of lending rules comes at a time when mortgage rates are easing , with an average two-year fix now at 4.91% and a five-year fix at 4.86%, according to Moneyfacts, a financial services provider. These are the lowest rates since before Liz Truss's disastrous mini-budget in September 2022.

A separate analysis found that house hunters could typically snap up a property for about £2,000 less than a year ago and about £6,700 less than the average only a month ago, according to Rightmove.

Across Britain, 2025 is ending with average asking prices at 0.6% (£2,059) less than late 2024. At £358,138, the average asking price in December is also 1.8%, or £6,695, lower than in November, according to the website.

Annual growth in asking prices has been strongest in the north-west of England (2.6%), flat in London (0%) and most negative in the south-west and south-east (both at minus 2.7%). Rightmove said prices usually fall in December but this year's decrease is bigger than usual.

However, a bigger than usual "Boxing Day bounce" is also expected by the website, as people who put their home moving plans on hold because of budget uncertainty start looking again after Christmas.

Source: GUARDIAN

Source: morningstar

Source: reuters

Source: Bloomberg Europe

Measures envisaged in Italy's 2026 budget could have "negative implications" on banks' liquidity because they might prompt lenders to cut interest paid on deposits to lower taxes, reducing liquidity buffers, the European Central Bank said.

In an opinion dated December 12 but published on Monday, the ECB also said higher taxes could persuade domestic banks to cut the already modest credit to families and firms while affecting investors' confidence in Italy.

Measures in the budget affecting banks and insurers, which also include curbs on the way lenders use interest expenses to lower their tax bills, are worth more than 11 billion euros ($12.93 billion) through 2028, according to Treasury estimates.

"The recurring introduction of ad hoc tax provisions unduly increases policy uncertainty regarding the tax framework, damaging investor confidence and potentially also affecting credit institutions' funding costs," the ECB said.

It is unlikely that Italy will radically revise its budget plans following the ECB criticism, given that the contribution from the financial sector funds more than 20% of the tax cuts and spending hikes that benefit households and businesses in the 2026-2028 period.

Both houses of Italy's parliament are due to approve the budget before the end of the year.

Among several measures, the government will oblige banks to spread over a longer period of time provisions on some loan losses which get deducted from income, while hiking by two percentage points the IRAP corporate tax weighing on domestic lenders and insurers.

"This might incentivise credit institutions to postpone or lower the amount of write-offs recognised on stage 1 and stage 2 loans in years affected by the change in taxation as they become more costly compared to the current situation," the ECB said.

Italian banks faced widespread criticism from Prime Minister Giorgia Meloni's right-wing coalition for failing to reward depositors or offer better lending conditions for firms, despite record profits driven by high interest rates and state guarantee schemes adopted in the wake of the COVID-19 pandemic.

The ECB, however, warned Italy that an increased tax burden on banks could lead to "abrupt adjustments" in their lending to the real economy, especially given the already moderate levels of bank lending in Italy.

"The elements of pro-cyclicality entailed in the draft law increase this risk of adverse lending adjustment," the opinion added.

($1 = 0.8507 euros)

Source: TradingView