Lunchtime news Tuesday 11th September 2007

According to the Government’s own figures, released yesterday, house price inflation increased by 2 per cent during July, taking the annual figure to 12.4 per cent – the highest level since March 2005. The increase compares with other house price indexes reported in Roof recently, such as Halifax and Nationwide Building Society, which recorded increases of 0.4 and 0.6 per cent respectively, despite six interest rate rises in the past year. It must be noted that CLG figures are a month behind the other house price indexes.

It’s not easy being a renter either, as the Royal Institution of Chartered Surveyors (RICS) shows that rents on residential property in the UK for the second quarter of the year are rising at record levels. Buy to let investors and increasing tenant demand are being blamed for pushing rents up to their highest ever level. A balance of surveyors reporting rises in rents over those reporting falls came in at 39 per cent, up from 20 per cent in the first quarter, while the balance reporting a rise in tenant demand was 29 per cent up from 15 per cent. New landlord instructions (an indicator of buy to let activity) showed that 20 per cent more surveyors reported a rise than a fall, up from 8 per cent the previous quarter.

Citizens Advice has also warned that 1.7 million households have inquired about help with mounting debts in the past year to April. The record number is a 20 per cent increase on the last year, and debt caseload now makes up a third of the workload. Most inquiries dealt with credit and store cards, but there has been a sharp rise in problems with day-to-day living expenses, such as gas and electricity arrears and council tax problems. The total debt by consumers stands at £1,345.6 billion, exceeding GDP at £1,330 billion.

The Financial Services Authority (FSA) tried to calm fears about the impact of Victoria Mortgages becoming the first British lender going into administration as a result of their specialism in loans to sub prime borrowers with poor credit histories, yesterday. Sub prime lending accounts for about 10 per cent of the home loan market in the UK, but although Victoria Mortgages represents less than 1 per cent of the mortgage lending market, it is believed that about 380 customers will be affected. A spokesperson for the company said: ‘This is a line-of-credit funding problem rather than an irresponsible lending problem. This is not to do with arrears or repossessions….It’s about the global credit squeeze and the fact that funding has been withdrawn by the banks…’