What caught my eye this week.
Will house prices fall, steady, or crash? I’d say a decline was the consensus view as we closed the door on 2022, with memories of Liz Truss still swirling about the porch like a frightful CGI spirit.
Yet having competent technocrats back in Downing Street after a multi-year hiatus has had such a calming effect on markets that the prospect of a proper slump seems to me to be abating fast.
PM Sunak and chancellor Hunt still can’t offer much in the way of growth. And that’s a problem in the long-term.
But even the slow puncture Brexit economy doesn’t seem quite so bad after October’s multi-lane pile-up.
Choose your poison
The major reason that if we’re going to economic hell in 2023 it’s on a Stannah Stairlift not a handcart is lower mortgage rates.
Declining swap rates had suggested there was room for lenders to reprice their mortgages cheaper if they wanted to play for market share.
And happily for anyone needing a mortgage, they’ve done so.
Massive lender Nationwide is the latest to cut rates across the board and join the sub-4% five-year fix club. Recent Weekend Reading links have flagged previous entrants including Virgin Money, Natwest, HSBC, and the Yorkshire Building Society.
Hardly universal, but far better than average five-year rates above 6% following the Mini Budget.
Getting the best rates does typically require lower loan-to-value ratios of 60% or less. Across the spectrum, lenders seem to be being more judicious about who they lend their cheapest money to.
Whether you’re buying or remortgaging, putting in a little extra cash might save you a lot of money if it unlocks a cheaper rate band.
Resetting the game
For sure lenders aren’t chucking money around like its confetti again. The days of less-than 2% five-year fixes have gone, at least for the foreseeable. Hence the froth is coming off the pandemic-era price pop.
But while employment remains strong – and with many of those who are leaving the workforce apparently doing so because they can afford to, to the dismay of the chancellor – it’s hard to see rates at today’s more reasonable levels being a catalyst for a ginormous crash.
Maybe we’ll even stumble into what the UK economy both needs and fears – stagnant prices.
More young people would then get a chance to move out of the chillingly expensive rented sector sooner, and start building housing equity instead.
Inflation will have to abate though for the economics of stable prices to work for home builders, if we’re to avoid the knock-on of even fewer new homes being built. Workers are too scarce now for a big government house building program. We need to the commercial sector to keep at it.
And of course mortgage rates could start to rise again. The US stock market wobbled this week as various economic stats have suggested it will be longer before interest rates can be cut there.
Rates remains the greatest guessing game in town. Which is very unfortunate for anyone having to make long-term choices about paying for the roof over their heads.
But everyone would suffer in a big slump, and after the past few years we can do without one.
Have a great weekend!
From Monevator
The UK’s biggest bond market crash – Monevator
FIRE-side chat: domestic geo-arbitrage made it possible – Monevator
From the archive-ator: Reviewing The Rules of Wealth – Monevator
News
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Brexit has cost UK £1,000 per household in lost productivity, says MPC member – The Overshoot
Renters leaving London at highest rate in a decade… – BBC
…while 73% of its workers would rather quit then return to office full-time – This Is Money
…and one in five of Britons are out of the workforce altogether – This Is Money
UK risks ‘disastrous’ food scandal due to lax post-Brexit borders, says NFU chief – Guardian
HMRC chases 4,300 social media influencers and online earners over tax [Search result] – FT
More risk, fewer rules: the plan to revive the City of London [Search result] – FT
Products and services
Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Navigating the rollercoaster UK mortgage rates ride – Guardian
How are high mortgage rates affecting renters? – Which
Premium Bond prize rate up to 3.3% from March – Be Clever With Your Cash
Monzo launches a 3% instant access savings option – AltFi
Open a SIPP by 28 February with Interactive Investor and get up to £1,000 in cashback, plus pay no SIPP fee for six months. Terms apply – Interactive Investor
15 ways to find the secondhand vintage furniture of your dreams – Guardian
VCTs: buyer beware, the tax benefits may not be worthwhile [Search result] – FT
Popular savings app Marcus raises rates, if you claim a bonus – This Is Money
Comparing the cheapest ways to cook a roast chicken – Which
Homes for book lovers, in pictures – Guardian
Comment and opinion
“It’s just not worth it”: why work no longer pays in the UK – Guardian
What four faddish investment concepts still teach us today – Humble Dollar
How many more bad apples are in the financial advisor barrel? – FT Advisor
Hands off our ISAs – The Motley Fool
Would you sell your business to your staff via an EOT? [Search result] – FT
Avoiding an inheritance tax shock like Sonia Fowler’s on EastEnders – Yahoo Finance
The unspoken risks of NOT retiring early – The White Coat Investor
A friendly reminder – Humble Dollar
The ten most important things Allan Roth tells clients – Advisor Perspectives
Fighting the last bull and bear market – A Wealth of Common Sense
Bedrooms and bank accounts – Finding Joy
Crypt o’ crypto
Crypto has become more correlated to stocks [and its timing sucks too] – Institutional Investor
Naughty corner: Active antics
Why the Medallion fund is the greatest money-making machine of all time – Of Dollars and Data
Breaking up Big Tech could be a positive catalyst for investors – Bloomberg via Yahoo
Thoughts on ‘the Berkshire system’ – Neckar
Hedge funds revisited – Morningstar
Valuing the unknowable – Investment Talk
Why meeting fund managers doesn’t much help you pick funds – Behavioural Investment
The case for volatility as the most useful measure of risk [Geeky!] – Verdad
‘Zombie VCs’ haunt tech investors as plunging valuations hammer industry – CNBC
AI mini-special
What is ChatGPT doing, and why does it work? – Stephen Wolfram
Why AI matters and how to invest – Shares Magazine
Bing AI can’t be trusted… – DKB Blog
Man beats machine at Go in human victory over AI [Search result] – FT
How AI will upend and extend existing copyright and royalty frameworks – Dror Poleg
Unplug the evil AI right now [Petition, even I think it’s premature!] – Change.org
Covid corner
Three years on, Covid lab leak theories aren’t going away. Here’s why – Prospect
Kindle book bargains
How to Make the World Add Up by Tim Harford – £0.99 on Kindle
Casino: The Rise and Fall of the Mob in Las Vegas by Nicholas Pileggi – £0.99 on Kindle
Fooled by Randomness by Nassim Nicholas Taleb – £1.99 on Kindle
The Art of Statistics: Learning from Data by David Spiegelhalter – £1.99 on Kindle
Environmental factors
Investing in Swedish heat pump maker NIBE Industrier – DIY Investor UK
How pesticides impair our senses – BBC
Big Oil won’t be ‘Big Renewables’ anytime soon – Semafor
Is carbon offsetting a con? – Prospect
Paleotsunami detectives hunt for ancient disasters – Hakai
Off our beat
Cheating at golf – Seth Godin
The weird reasons there still isn’t a male contraceptive pill – BBC
Why you can’t trust the media – Slow Boring
The new gatekeepers [Excellent presentation, slides] – Benedict Evans
I am not a dog person anymore – Cullen Roche
And finally…
“Democracy requires the ability of a population to pay attention long enough to identify real problems, distinguish them from fantasies, come up with solutions, and hold their leaders accountable if they fail to deliver them.”
– Johann Hari, Stolen Focus
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