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Can house prices keep rising as rates rise and inflation bites?

House prices are an element of the UK economy that we could have done without emerging from the pandemic stronger than before.

The bizarre pandemic property boom, fuelled by a cocktail of cheap mortgages, itchy feet, a desire for more space, and stamp duty cut, has sent house price inflation spiralling.

Britain’s biggest building society Nationwide revealed yesterday that on its long-running index, house prices were up 12.6 per cent over the past year. That has added £29,000 to the cost of the average home to put it at £260,320.

The average home is 20 per cent more expensive that it was in February 2020 when the pandemic began.

A dubious honour: House prices are now at a record high compared to wages surpassing even the 2007 pre-financial crisis peak

A dubious honour: House prices are now at a record high compared to wages surpassing even the 2007 pre-financial crisis peak

To put this in context, if you’d like to buy the average house you’ll need to rustle up an extra £44,183.

But head for some of the high house price areas of the UK and you could be spending £100,000 or even £200,000 more on the same family home now compared to before lockdown became a thing. 

This bout of property inflation may make people feel a bit richer on paper but is not a good thing.

Unless you and plan on cashing out or downsizing – or are a buy-to-let investor – it only makes your life harder.

First-time buyers are watching house prices rocket far faster than they can save a deposit and home movers find that even if they can sell for more, that bigger place they want has gone up by even more in price.

The winners here are banks and building societies who get to sell ever bigger mortgages, often spread over far longer periods than in the past.

And the problem is compounded by the issue that not only have house prices surged but we started from a bad place for that to happen.

When the pandemic struck homes were almost as expensive compared to wages as they had ever been: Nationwide’s average house price to earnings ratio stood at 5.9 compared to the pre-financial crisis record of 6.4 in 2007.

Since autumn, the UK property market has achieved the dubious distinction of surpassing that: the house price to earnings ratio is now 6.6.

To put this in a longer term context in the late 1980s property boom, the house price to earnings ratio peaked at 4.9.

‘Hang on, but interest rates were double digit back then. look how cheap mortgages are now’, I hear our older readers shout.

This is true, but house prices even at that frenzied moment of the property market were much lower compared to wages.

The difference in the affordability vs wages of the average home between 1989 and today is almost two extra whole annual average pre-tax salaries.

How much longer can this continue? At what point do we reach the level where people just cannot keep paying more for homes?

Isn’t it about supply and demand? 

Britain’s sky high house prices are not a function of supply and demand. 

It may be that we need to build more homes in the right places, but house prices have been driven ever higher by low interest rates enabling people to take out larger and larger mortgages. 

Borrowers have also taken to extending mortgage lifetimes to afford ever more expensive homes – and the Bank of Mum and Dad has dug deep to fund deposits. 

Two Bank of England economists wrote an interesting paper on how cheap mortgages have driven up house prices a few years ago, stating: ‘We find that the rise in real house prices since 2000 can be explained almost entirely by lower interest rates. Increasing scarcity of housing, evidenced by real rental prices and their expected growth, has played a negligible role at the national level.’

Meanwhile, new build homes are almost always sold at a premium price to existing ones and increases in supply have not been found to lower property prices.

The Letwin Review in 2018 looked in detail at how developers deliberately build slowly so as to not bring down house prices.

Sir Oliver Letwin highlighted that developers buy land based on local property values and build at a rate that won’t flood the market, so as to maximise profits.

At numerous points over the past 18 months, it’s been suggested that this runaway house prices train must soon run out of steam.

The stamp duty holiday has finished, the return to offices has begun, the pandemic race for space is surely nearly run, but still the boom hasn’t ended.

Now a fresh dark cloud threatens to rain on the parade though: the cost of living crisis triggered by surging inflation – and the knowledge that Russia’s war in Ukraine is only likely to make that worse.

At the same time as this is happening, interest rates are rising faster than expected and this has sent mortgage rates up from rock bottom levels.

Mortgages are, of course, still incredibly cheap.

Those same older readers I mentioned previously find it amusing – and somewhat galling – when we talk about the cheapest five year fixed rate being ‘hiked’ from 0.91 per cent to a mere 1.59 per cent, but costs are rising.

And as we highlighted this week, banks and building societies are also starting to factor in the future effect of the cost of living squeeze in affordability calculations.

This all limits the amount people can borrow and if home buyers can’t get ever larger mortgages, eventually house price inflation will be crimped.

The question then becomes whether banks will start loosening borrowing criteria?

These are far tighter than in the 2000s boom, when bumper interest-only mortgages with no repayment plan needed help send property prices spiralling.

I wouldn’t expect a return to those heady days of ‘would you like to borrow some more’ lending, but I also wouldn’t rule out some easing from well-financed banks and building societies in no hurry to remove the punch bowl from the party.

However, this feels to me like a time to exercise a bit of individual caution.

For buyers, avoid overpaying for a property and be careful of paying top whack for a home that you cannot add any value to.

For homeowners, if you’ve got the end of a fixed rate mortgage coming up, explore your options now and consider trying to secure a new rate well in advance. (Read our tips on how to find a new mortgage here).

Interest rates are rising, life is getting more expensive and that house price graph can’t keep rising towards the sky forever.

House prices had a slight early pandemic blip and then soared, Nationwide's figures show

House prices had a slight early pandemic blip and then soared, Nationwide’s figures show

Best mortgage rates and how to find them

Finding a mortgage can seem confusing due to the huge range of deals on offer.

This is Money has partnered with independent fee-free mortgage broker L&C, to help you find the right home loan.

Our mortgage calculator can let you filter deals to see which ones suit your home’s value and level of deposit.

You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and even ten-year fixes, with monthly and total costs shown.

Use the tool at the link below to compare the best deals, factoring in both fees and rates. 

> Compare the best mortgage deals available now  

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Copyright Dispute: DC Comics And ‘Fables’ Author Clash over Ownership, Author Aims for Public Domain

A detail from a 'Fables' cartoon by Bill Willingham. Image courtesy of the publisher ECC.
A detail from a ‘Fables’ cartoon by Bill Willingham. Image courtesy of the publisher ECC.

This is a story full of fairy tales. In some ways, it even resembles one. And yet it also proves that, in the real world, things rarely end happily ever after. A few days ago, Bill Willingham, the father of the celebrated Fables comic book series, announced that he was sending his most cherished work to the public domain, that is, to everyone. That’s only fair, since that is also where he got the main characters of his stories, from Snow White to the Wolf, from Pinocchio to Prince Charming, who were then relocated to modern New York. In this tale, the hero has long-faced mistreatment at the hands of the villains, DC Comics, the owner of Vertigo, which publishes the work in the United States, and its executives.

“If I couldn’t prevent Fables from falling into bad hands, at least this is a way I can arrange that it also falls into many good hands,” Willingham wrote in an online post in which he decried the label’s repeated attempts to take over his creations and opposed them with this final extreme remedy. But the company responded that it considers itself to be the true owner of the series.

In a statement published by the specialized media IGN, the company threatened to take “necessary action” to defend its rights. Thus, the end of the dispute is uncertain. But it is unlikely that everyone will end up happily ever after.

In the meantime, in a new post, Willingham celebrated the massive support he received. In fact, for the moment, he has declined all interview requests — he did not respond to this newspaper’s request, nor did the publisher — arguing that he preferred to spend the next few days working on new artistic projects. Meanwhile, the dispute continues.

Fables is one of the most celebrated graphic novels of the last 20 years, and it has spawned spin-offs and a video game adaptation (The Wolf Among Us).

This situation also touches on a key issue, namely, the intellectual property rights of characters and works, especially in a sector where, for decades, dozens of cartoonists and screenwriters have accused comic book giants Marvel and DC of pressuring them to cede their ideas and accept commissioned contracts.

Willingham sums it up as a policy aimed to make creators sign “work for hire” agreements and crush them. All of this makes a gesture that was already intended to make a splash even more resonant.

A detail from a ‘Fables’ cartoon by Bill Willingham. Image provided by ECC
A detail from a ‘Fables’ cartoon by Bill Willingham. Image provided by ECC.

Indeed, the battle over intellectual property is as old as contemporary comics: the copyrights for Superman, Batman and The Fantastic Four all have unresolved disputes and complaints from Jerry Siegel, Bill Finger and Jack Kirby over the contemptuous treatment they suffered. And heavyweight Alan Moore has been lamenting for years that DC took away his ownership of famous works like Watchmen.

Along with prestige and principles, tens of millions of dollars are at stake, especially now that the film industry has become interested in comics.

“When you sign a contract with DC, your responsibilities to them are carved in stone, where their responsibilities to you are treated as “helpful suggestions that we’ll try to accommodate when we can, but we’re serious adults, doing serious business and we can’t always take the time to indulge the needs of these children who work for us” the Fables author wrote on his blog. Following the impact of his original message, Willingham posted two other texts. He maintains that he had thought about sending his work into the public domain when he passed away, but that “certain events” have changed his plans: among them, he lists the changes in management and attitude at the top of the publishing company; the multiple breaches of obligations such as consultations about covers, artists for new plots and adaptations; DC’s forgetfulness when it came to pay, which forced him to demand invoices of up to $30,000; the suspicious frequency with which the publisher attributed it to “slipping through the cracks” (to such an extent that the author insisted that they stop using that expression); and the time and chances he gave them to respect the pact, renegotiate it or even break it and consensually separate.

A detail from the cover of the first volume of Bill Willingham's comprehensive collection of 'Fables.'
A detail from the cover of the first volume of Bill Willingham’s comprehensive collection of ‘Fables’.

“Shortly after creating Fables, I entered into a publishing agreement with DC Comics. In that agreement, while I continued to own the property, DC would have exclusive rights to publish Fables comics, and then later that agreement was expanded to give DC exclusive rights to exploit the property in other ways, including movies and TV.

DC paid me a fair price for these rights (fair at the time), and as long as they behaved ethically and above-board, and conducted themselves as if this were a partnership, all was more or less well. But DC doesn’t seem to be capable of acting fairly and above-board.

In fact, they treated this agreement (as I suppose I should have known they would) as if they were the boss and I, their servant. In time that got worse, as they later reinterpreted our contracts to assume they owned Fables outright,” Willingham laments. Hence, he concluded that “you can’t reason with the unreasonable.”

Having ruled out a lawsuit as too expensive and time-consuming at 67 years of age, he found a more creative solution: if they prevented him from owning his works and benefiting from them as he was entitled to do, he would not let the publisher do so either. Or, at least, everyone could use the comics as they wished. But the label was quick to clarify in its statement to IGN: “The Fables comic books and graphic novels [are] published by DC, and are not in the public domain”.

For his part, Willingham promises to continue fighting for all the conditions of his still-in-force contract that he considers DC to have violated, as well as for the last installments of the series, the final script of which he delivered two years ago.

There will be additional chapters in this dispute, as well as in many other ones like it: in 2024, the historic first image of Mickey Mouse, the one that starred in the 1928 short Steamboat Willie, enters the public domain in the U.S. and other countries. Copyright in the U.S. lasts for 95 years, and math is an exact science.

Therefore, in a few years, King Kong, Superman and Popeye will meet the same fate. But The New York Times has wondered how the “notoriously litigious” Disney will react and how far it will go to fight in court. And who would dare to freely use all these works for fear of a million-dollar lawsuit? The same question surrounds DC and similar companies. Because in the real world, fairy tales are rare. Or they end up in court.


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Assessing The Potential of The India-Middle East-Europe Economic Corridor (IMEC) Against China’s Belt And Road Initiative (BRI)

(THE VOICE OF EU) – In a recent address, Indian Prime Minister Narendra Modi hailed the newly unveiled India-Middle East-Europe Economic Corridor (IMEC) as a transformative force poised to shape global trade for centuries. While the IMEC undoubtedly presents a significant development, it’s vital to scrutinize its potential impact compared to China’s ambitious Belt and Road Initiative (BRI).

The IMEC was jointly announced by US President Joe Biden and Saudi Crown Prince Mohammed bin Salman at the G20 summit in Delhi. Designed to fortify transportation and communication networks between Europe and Asia via rail and shipping routes, the project not only holds regional promise but also reflects a strategic move by the US in its geopolitical interests, particularly concerning China.

However, the IMEC faces a formidable contender in the form of China’s BRI, which celebrated its tenth anniversary this year.

Despite facing some headwinds, including a slowdown in lending due to China’s economic deceleration and concerns raised by nations like Italy, Sri Lanka, and Zambia regarding debt sustainability, the BRI remains a monumental global undertaking.

With investments surpassing a staggering $1 trillion and over 150 partner countries, the BRI has transformed from a regional initiative to a near-global endeavor.

Comparatively, the IMEC may not immediately match the scale or ambition of the BRI. While the US, Japan, and the G7 nations have introduced similar initiatives like the Global Gateway and Partnership for Global Infrastructure and Investment, none have achieved the expansive reach or influence of the BRI.

The emergence of these projects over the past five years, however, demonstrates the BRI’s pivotal role as a catalyst for global economic growth.

Viewing the IMEC solely through the lens of opposition to the BRI may not provide a comprehensive understanding of its potential.

Instead, the IMEC contributes to a broader trend of transactional partnerships, where countries engage with multiple collaborators simultaneously, underscoring the complex and interconnected nature of global trade relations.

Yet, realizing the IMEC’s aspirations demands meticulous planning and execution. A comprehensive action plan is expected within the next 60 days, outlining key governmental agencies responsible for investments, allocated capital, and implementation timelines.

Establishing a streamlined customs and trade infrastructure is equally critical to facilitate seamless transit, a challenge highlighted by the Trans-Eurasian railway’s 30-country passage through Kazakhstan.

Navigating geopolitical complexities between partner countries, particularly the US, Israel, and Saudi Arabia, poses another potential hurdle.

Ensuring these nations maintain a unified strategic vision amid differing priorities and interests requires careful diplomatic coordination.

Furthermore, the IMEC will compete directly with the Suez Canal, a well-established and cost-effective maritime route.

While the IMEC may enhance relations with the UAE and Saudi Arabia, it could potentially strain ties with Egypt, prompting critical assessments of the project’s economic viability.

Beyond trade and economics, the IMEC ambitiously aims to incorporate diverse sectors, from electricity grids to cybersecurity.

This multi-dimensional approach aligns with discussions held in security forums like the Quad and, if realized, could significantly contribute to a safer, more sustainable global landscape.

As we contemplate the potential of the IMEC, it is with hope that the lofty ambitions outlined in New Delhi will culminate in a tangible and positive transformation for the world.


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Do water features like a pool, pond or fountains add value to a home?

He may be used to making a splash in politics. But now it seems that Boris Johnson will be able to do that closer to home, too.

This week, it was revealed that the former prime minister has been given permission to build a swimming pool in the garden of his £3.78 million Oxfordshire country home. 

A move which will doubtless provide a restful place to unwind, exercise and relax as he navigates post-political life.

Deep pockets: A country home with outdoor swimming pool

Deep pockets: A country home with outdoor swimming pool 

But even if you don’t have deep pockets for such deep-water projects, it’s still possible to create the tranquil benefits of waterside living. 

Whether it’s through installing a hot tub, pond, or even decorative fountains. 

But, as our experts point out, it’s important to weigh up the pros and cons before splashing out…

Frequent attention

Introducing any kind of water feature to your garden requires some upkeep.

During the spring and summer, you’ll need to top up your water feature regularly to replenish water loss caused by evaporation. 

And there’s also the task of removing branches and leaves as well as pruning bushes nearby.

‘It’s also a good idea to give your water feature a thorough clean and add a wildlife-friendly algaecide or UV steriliser after cleaning,’ says Will Haxby, home and garden sales director at Haddonstone, which specialises in stonework ‘as this will prevent algae growth build-up caused by the warm conditions.’ 

When the temperatures drop, drain off water before the winter to protect your feature from frost. 

You’ll also need to clean the pump to remove any limescale build-up.

Will it add value?

Installing features like fountains can add to the kerb appeal of your home, says Tabitha Cumming, a property expert at The Lease Extension Company, says: ‘This means that it will make a better first impression and potentially add value to your home.’

Amer Siddiq, founder and CEO at Landlord Vision, believes that water features such as fountains can have other benefits, too.

‘They can help mask unwanted noises from roads or neighbours. They can also attract birds and wildlife, adding a touch of nature to your surroundings.’

Andrew Landers, director at Property Rescue, a home-buying service, says: ‘The post-covid world has seen the importance of outside space massively increase, and any enhancements that make this space more enjoyable is going to have a positive impact on the value of a home.’

Hidden costs

Factor additional costs into your budget, too, since water features rarely boil down to a single, one-off payment.

‘For example if any of your water features have fish, these can incur additional costs from the food and care that they will require, and you will also need to be vigilant to keep them safe from predators,’ says Cumming. 

Some features can cause structural issues, too. 

‘Fountains may become damaged through wear and tear or have cracks caused by water freezing over,’ she adds.

Beware risks

In summer, having a water feature will make you a magnet for friends and family who want to pop around and cool down. 

All of which, says Anna Giles, an associate at law firm Wedlake Bell, could increase scope for accidents

‘Homeowners should bear in mind that they could be subject to a claim for compensation if someone injures themselves at their property, so reasonable care needs to be taken to ensure that visitors and/or occupiers of the property will be safe.’

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