Lunchtime news Thursday 6 March 2024

The Bank of England has left interest rates at 5.25 per cent for the second month. The decision was not unanimous – six members of the Monetary Policy Committee, which determines the rate, wanted to keep the rates unchanged due to rising inflation, while three members argued for an immediate cut in rates.

Halifax’s house price index is out again, and figures show that growth slowed for a sixth consecutive month in February, down 0.3 per cent from January. This brings the annual rate down to 4.2 per cent, the lowest since October 2005.

And it looks like the buy-to-let property boom is over too. The Royal Institution of Chartered Surveyors released its quarterly letting survey today, revealing the first fall in new landlord instructions to surveyors (to let their properties) since the study began in 1998. The credit crunch’s restrictive lending criteria has reduced the number of buy-to-let mortgages approved, as well as the number of mortgages available to investors. However, RICS said that established investors were reaping the benefits of gross rental yields (rent as a percentage of a property’s value) increasing at its fastest rate since 2005.

And throughout Europe, nearly all countries suffered a sharp drop in prices or house price inflation, according to a further study by RICS. However it said that the effects of the global credit crunch, which is driving up borrowing costs in Britain, has yet to hit the ‘eurozone’, as mortgage finance remains readily available there. Never-the-less, Britain had the sixth biggest house price increase in Europe last year, while Poland came out on top with a 28 per cent increase.

The Joseph Rowntree Foundation (JRF) has called for a new safety net – a new form of insurance for homeowners – to be introduced to prevent those unable to meet their mortgage repayments from losing their homes. The scheme, funded in part by both government and lenders, would replace the government’s income support for mortgages and would cover 10 months of complete mortgage payments should the borrower become unemployed, fall sick or have an accident. JRF believe that getting lenders to part-fund the scheme would give them an incentive not to rush to repossess.

The chancellor, Alistair Darling is expected to announce in next week’s budget that mortgages will be graded in Britain – with the least risky given an official seal of approval. The aim is to ‘unfreeze’ the market for mortgage securitisations, where lenders sell packages of mortgages to long-term investors, and to relieve funding problems that are increasing the cost of borrowing. Some experts warn of the possibility of creating a two-tier system, where the poor and higher-risk homebuyers may find the mortgages they are offered prohibitively expensive.

The government is coming under increasing pressure to help poorer families and pensioners in the next budget, as cost of living soars. The average household is £5 a week worse off than last year, as the cost of living rose by nearly 5 per cent. Although wages increased, bills for essentials such as food and trasnport increased by more, while energy costs have pushed more than four million households into fuel poverty.

And finally, the Duchess of York is to use her experience of ‘eating disorders, low self-esteem, family conflict, financial crisis, divorce and bereavement’ to help families on a housing estate in Hull improve their lifestyle. And the good cause – an ITV reality TV show to be screened in summer. Understandably some of the residents of the estate were sceptical that the duchess would be able to transform their lives.