ROOF Blog archive

Senior Bank of England official David Blanchflower warned yesterday that house prices could fall by 30 per cent over the next few years. But despite claims that up to £1,000 a week could be wiped from their value of each property, he argued that the drop would be sustainable. He added that ‘aggressive action’ was needed to stave off the threat of the economy falling into recession.

His speech comes as the number of mortgage approvals hit an all-time low last month according to figures collated by the Bank. The number of new mortgages approved in March fell to a low of 64,000, down from 72,000 on the previous month. It was the lowest level since records began in January 1999, and down 44 per cent on the figure for the same month in 2007. The bank also reported a drop in loans approved for remortgaging and other purposes such as buy to let.

Meanwhile, the Governor of the Bank of England has attacked City banks who have rewarded staff with huge bonuses for taking massive risks, saying their pay structure were too closely linked to short-term rather than long-term results. Mervyn King said that the credit crisis was caused by bankers betting on high-risk complex financial products that not even their managers completely understood. They would have to do better if they want to keep their jobs, he added.

And after yesterday’s news that Hometrack and the Land Registry house price index showed a fall, the Nationwide Building Society has also reported the first annual fall in house prices for 12 years on its index. According to its figures prices fell by 1.1 per cent in April – the sixth month decline in a row and down 1 per cent from the levels seen in April 2007. Nationwide blames the price falls on a weakening market that has been hit by ‘poor affordability and tighter financial market conditions’.

The team in charge of the London 2012 Olympics have been accused by MPs of ’spending money like water’ and were criticised for their ‘risible approach to cost control’ which has seen the bill for the event soar from £2.4 billion to £9.3 billion. The report, which is due out today praises the progress made by the organisers so far, but stresses the ‘priority now should be to keep costs down’.

And finally, prisoners have been blocked from receiving a pay rise by the Prime Minister. Inmates were due to be handed a £1.50 a week pay rise, the first increase since the mid-1990s, until Gordon Brown heard about the Prison Service Management Board’s decision and personally intervened to overrule the rise.

Complaints about military accommodation are growing according to the Army Families Federation (AFF), a support group for British service personnel. The federation says that 59.4 per cent of more than one thousand calls it received last year were about housing, compared with just 39 per cent in 2005. The AFF blames the fact that there are no longer wardens looking after military housing estates, and when soldiers are away it can leave families feeling vulnerable.

Two elderly sisters have lost their final appeal to the European Court of Human Rights over paying a massive inheritance tax bill. The sisters, aged 90 and 82 have lived together in Marlborough all their lives and appealed to the European Court to be recognised under the tax rules as a cohabiting couple, saying the Human Rights Convention articles guarantee ‘protection of property’. It means that when one of them dies, the other will have to pay the 40 per cent inheritance tax on their property. The sisters have written to the chancellor after every budget since 1976 to request a change in their status.

More housing figures out today, with the Land Registry showing that the annual rate of house price growth has slowed for the seventh month in a row in England and Wales, down to 3.6 per cent in March compared with 5.3 per cent in February. Month on month figures show a 0.4 per cent decrease. The Land Registry figures are calculated from the sale prices of properties in England and Wales, rather than lenders’ data.

And Hometrack, the property research website, says that there has been a 0.9 per cent slump in the average price of a home from a year ago. The ‘highly symbolic’ drop could lead to negative equity problems and is the first price index showing house prices falling on an annual basis. Homes are now staying on the market for a record 9.1 weeks before selling, and sellers are taking a 7 per cent cut in asking prices.

It’s now the turn of the HBOS group to announce plans to raise £4 billion of extra funding from a right issue to its existing shareholders. Following the Royal Bank of Scotland’s decision to raise £12 billion last week, HBOS, the most widely-held UK share, said the extra funding would allow it to grow internationally and invest in residential mortgage and savings business. ‘HBOS is not forecasting a meltdown in the economy… But because of the instability of global financial markets… HBOS has decided to reinforce its hull against the risk of hitting an iceberg.’

According to Savills, the estate agents, house prices could fall by 25 per cent if the credit crunch persists. However, a spokesperson said that if home loans were more freely available the fall could be reduced to around 6 per cent. Savills also added that the continuing shortage of homes in most regions will maintain higher prices. A divide is apparently opening between what Savills describe as the ‘super-wealthy’ and ‘merely wealthy’, with the latter fearing job losses and struggling to secure a home loan, whereas demand for house costing above £5 million is likely to continue ‘unabated’.

Abbey National is expected to reveal a 20 per cent jump in first quarter profits this week, to £270 million, after picking up mortgage customers from its rivals. It grabbed between 15 and 20 per cent of the UK mortgage market in the first few months of the year, compared to around 6 per cent last year.

And most banks have now effectively pulled the plug on new buy-to-let mortgages, while thousands of existing landlords will face huge rises in the cost of remortgaging. Abbey withdrew all its buy-to-let range leaving only a relatively expensive fixed rate deal; HBOS has raised its interest rates and arrangement fees for the third time in as many weeks; and Cheltenham & Gloucester, the fourth biggest lender in the UK, increased their rates for the second time in three weeks also.

Repossessions are set to soar 25 per cent according to research by the Centre for Economic and Business Research (CEBR). It believes that more than 33,000 borrowers will lose their homes once their fixed rate mortgages come to an end. With house prices predicted to fall by 10 per cent in the next two years and the number of transactions expected to decline by 25 per cent, a ‘rise in the number of repossessions’ will result.

And you know times are tough when instead of being gazumped, you’re being gazundered. Gazundering is where a homebuyer demands a reduction on the agreed purchase price at the last minute. A recent report by the Guardian has shown that some buyers are demanding as much as 20 per cent off the price, just before exchange, putting the whole transaction in jeopardy.

Hopes of further cuts in interest rates may not amount to much as minutes from the Bank of England’s monetary policy committee meeting this month showed a three way split in the decision to cut the rate to 5 per cent. Two members voted to keep the rate the same, one wanted a large drop in rates of a half a point, while six voted in favour of a quarter point cut, arguing that a move would reduce the risk of the economy slowing sharply.

The director-general of the Confederation of British Industry (CBI) singled out the bonus culture as one of the main causes of the financial problems now engulfing the world’s banks. The bonuses rewarded success but did not penalise failure, while banks were ‘cavalier’ in their approach to risk, the CBI chief said. He also added that companies could face further problems because scarce credit and a slowing economic growth made it ‘highly likely’ that corporate failure would follow.

Energy companies were accused of failing to help millions of people on low incomes with their bills. Yesterday’s meeting was described as ‘disappointing’ and ‘falling far short of expectations’ by consumer groups and ministers, who complained that there was no tangible promise to lower the bills of the estimated 4.5 million households who spent at least 10 per cent of their income on gas and electricity. Energy firms did agree to provide advice on switching suppliers and helping find the best deals.

A ruling by the courts yesterday means that couples who live together and buy a house together may now have to split the proceeds equally if they break up. An appeal court decision found that at the end of a 23-year relationship a couple whose house was registered in joint names although only one of the partners contributed to the mortgage payments had to equally split their assets. The partner who had not contributed to the mortgage, was found to have paid household expenses from her income and benefits during the relationship, and therefore it was the couple’s intention that whatever their ‘unequal contributions’ were, this did not matter as much as their ‘shared intentions’.

And finally, an amusement park is coming to Baghdad. A multi-million dollar fifty-acre site in central Baghdad is being developed to include an America-style amusement park featuring a skateboard park, rides, a theatre and museum. The Iraqi government is optimistic of its future saying: ‘there is a shortage of entertainment in the city… The fun park is badly needed for Baghdad. Children don’t have any opportunities to enjoy their childhood’, before adding that entry to the park will be strictly controlled.

Following yesterday’s meeting between chancellor Alistair Darling, housing minister Caroline Flint, and key mortgage industry figures, Darling said that homeowners would now have enough support to ensure that their homes are not repossessed. However the ministers stopped short of outlining just how they would help people keep their homes. Mortgage lenders welcomed the plan as an important step in tackling the industry’s funding difficulties, but said that the Bank would need to commit to billions more in funding before the money markets functioned properly again. They also said that mortgage rates will continue to rise and may not return to the low rates of the past year. On Monday, the Bank of England (BoE) injected £50 billion into the banking industry.

The cash injection on Monday had an immediate impact on some of the UK’s biggest lenders – but not necessarily in the way hoped. Abbey National, Britain’s third biggest mortgage lender, immediately cut its two-year tracker and flexible mortgages by 0.1 per cent, but raised rates on some of its fixed-rate mortgages, stopped selling buy-to-let mortgages to landlords, and introduced stricter lending rules for homeowners who now need a deposit worth 25 per cent to qualify for the cheapest deals.

Meanwhile, the scheme has come under fire from Shadow Chancellor George Osborne who wants the BoE to explain why it is including credit card debts in the range of collateral it was prepared to swap for government bonds. Osborne warned that taxpayers should only accept the most secure assets from banks in exchange and Lib-Dem Treasury spokesperson Vince Cable warned that the swap plan would expose taxpayers to massive risk. He believes that the banks had yet to ‘come clean’ about the full extent of their financial losses, and said that the scheme is only dealing with the symptoms of the crisis, not the cause.

There is further news of a slump in mortgage lending as the British Bankers Association (BBA) said there were just 35,417 new mortgage approvals in March, 18 per cent lower than in February, 46 per cent lower than March last year and the lowest monthly figure since 1997. Overall credit card lending increased slightly, while unsecured lending weakened.

In other news, Westminster council is targeting 600 families which it says are having ‘a long-term negative effect on society as a whole’. The council says that about 3 per cent of these families are dealt with by up to 20 different bodies, tend to be responsible for a ‘significant proportion of local crime and disorder’ and represent a ‘burden on the taxpayer in terms of welfare benefits, social care, healthcare, criminal justice and educational support’. The council is to look at ways of changing their behaviour and hopes that the multi-agency team will be in place by the beginning of next year.

And finally, a replica 1930s semi is being used to test new technologies aimed at improving energy performance in Britain’s ageing housing stock. Energy supplier Eon is teaming up with the University of Nottingham to build a three-bedroom house using the latest low-carbon technology to generate and manage energy within the house. A spokesperson for the project said that more than 21 million homes – 86 per cent of the current total – will still be in use in 2050, and it was ‘vitally important’ to reduce the energy consumption in existing homes.

The Bank of England this morning announced details of a £50 billion plan aimed at halting the spread of the credit crisis. Banks can swap UK and European mortgage debts for secure government bonds for a period of a year (with the potential to renew them for up to three years). However, the swap will only apply to mortgage debts on the banks’ books at the end of 2007. Mervyn King, governor of the Bank said that the scheme is intended to improve liquidity in the banking system and increase confidence in the financial markets.

Alistair Darling is also expected to insist that banks offer more support for homeowners in exchange for the government’s help in taking on some of the banks’ mortgage debts. ‘Mortgage holidays’ for those with good credit records, and allowing distressed homeowners to sell to their lender and stay on as tenants (sale and rent back) are two of the ideas to be discussed at Darling’s meeting with the banks and building societies tomorrow.

The Welsh Assembly has agreed to provide official help to people struggling with their mortgages, under the controversial sale and rent back schemes. The Assembly’s plan would allow registered social landlords and housing authorities to buy existing properties and rent them back to their previous owner for a ‘reasonable sum’. Until now social landlords had strict limits on the extent to which they could implement such schemes. The latest move would provide greater protection than currently available in the private sector.

The latest annual house price inflation figures for England and Wales from Rightmove.com showed that last month prices slowed to their lowest level since mid-2005, down 10 per cent. Prices in the North West fell by 1.4 per cent from a month earlier, and prices in London dropped 0.9 per cent.

And further economic woe comes from the Ernst & Young ITEM Club (EYIC) which is forecasting two years of sluggish growth unless the government takes ‘decisive action’. Describing the housing market as bleak and about to get a whole lot worse, EYIC estimate that growth will slow to 1.8 per cent this year and 1.5 per cent in 2009, while house prices will fall by 10 per cent and the number of people moving homes will drop by 10 per cent during the next two years.

The 2012 Olympic games is unlikely to benefit locals in east London, according to research by the New Economics Foundation. It says that the vast amount of money being poured into the games will go to consultants, developers and large companies, leaving local businesses unable to compete and local people priced out of the housing market due to ‘gentrification’.

And finally, millions of Britons who consider themselves middle class are finding out their claim to middle-class status is an illusion, as the credit squeeze means they can no longer carry on funding a middle-class lifestyle. According to moneysupermarket.com around 15 million people – a quarter of the population – have been taken out loans totalling £35 billion to try to maintain the illusion. Richard Mason, managing director of insurance and home services at moneysupermarket.com, said: “With the credit crunch taking hold and the housing market faltering, it’s worrying to see that so many people are spending and borrowing beyond their means to try and keep up with the lifestyles of others.” The study found that Cardiff had the highest number of aspirational class climbers, followed by Leicester and Newcastle.

Investment bank Morgan Stanley predicts that house prices will fall by 15 per cent in the next two years, pushing one in 10 homeowners into negative equity, with first-time buyers being particularly affected. The report warns that these estimates may be too conservative as the figures do not take into account mortgages taken out this year.

The Bank of England’s chief economist has warned homeowners that house prices are likely to remain exposed to further falls in coming months, because of the continued short supply of new home loans. Saying that the Bank was ‘walking a tightrope between the threats to economic growth and the dangers from inflation,’ it ruled out promising to cut interest rates.

And the Council of Mortgage Lenders (CML) thinks things will only get worse as it predicts the level of mortgage lending will fall further. Its latest figures show that gross mortgage lending rose by 5 per cent last month, 17 per cent lower than March last year. An increase of around 20 per cent is typical for the period between February and March.

The Royal Bank of Scotland (RBS) is expected to ask its shareholders for up to £12 billion in extra cash (potentially raised through selling shares to existing investors) in a bid to improve its financial position. Other banks are expected to follow suit, however analysts stressed that this was ‘not a customer issue, it’s a shareholder issue’ and those with accounts at RBS should not worry.

Hometrack’s research shows that buy-to-let investors are feeling the pinch of oversupply, as rents tumble in some city flats. The rental market in cities such as Liverpool and Nottingham was ‘never large enough to soak up’ the amount of building going on, and have seen rents drop by 2 per cent when comparing the first quarters of 2007 and 2008. Overall however, rents have increased by an average of around 4 per cent across the UK, with central London and the Docklands recording particularly large rises. The cost of renting compared with the cost of servicing a mortgage has narrowed significantly over the year to the end of March. In the first quarter of 2007 rents cost 75 per cent of mortgage costs, rising to 81 per cent by the first quarter of 2008.

ROOF’s Affordability Index hit the headlines today. The average price for a first-time property rose from just over £52,000 to nearly £160,000 in the decade to 2007. Mortgage payments took up almost 21 per cent of an average household’s income in 2007, compared to 12 per cent in 1997, while the average first-time buyer’s home cost 3.4 times their earnings, double the ratio of 1997 at 1.72. The latest issue of ROOF, containing the Affordability Index and the Housing Market Healthcheck, is published today.

The Office of Fair Trading had accused 112 construction companies of bid rigging following a three-year investigation. Firms such as Balfour Beatty and Crest Nicholson, which build houses, schools, hospitals and commercial buildings, are accused of falsifying invoices and ‘cover pricing’ – where companies asked to quote on a job agree beforehand which one of them will win the tender. That company then tenders a high price with the other firms placing even higher bids. If the allegations are substantiated the companies could face fines totalling tens of millions of pounds.

As reported yesterday, the Bank of England is close to agreeing a scheme that will allow lenders to swap their mortgage-backed assets for government bonds, which it is hoped will ease the credit crunch. There is speculation that Alistair Darling will make an announcement as early as next week, when he is due to meet representatives from the Council of Mortgage Lenders. Darling admitted yesterday that the government needed to ‘sharpen up’ its act on communicating its financial strategy. Bank shares on the FTSE rose on the back of hopes of releasing extra money.

In the meantime, the British Banker’s Association (BBA) has brought forward a review into how it sets the London Interbank Offered Rate (Libor) amid concerns over the rate’s credibility. The BBA calculates the Libor figures daily in various currencies for differing borrowing periods, based on an average of interbank rates from 16 banking institutions. However the Libor rate has ‘evolved far beyond its humble roots as an interbank lending rate… It now touches everyone,’ said a recent report into the mechanism. Critics say that the rate has recently hit levels ‘significantly’ above the base interest rate set by the Bank of England.

And finally, if you’ve a spare £1 million you could do worse than buy a parsonage, according to Savills estate agents. As house prices fall across the country, Savills believe that rectory and vicarage purchases are one of the few parts of the market that haven’t suffered from the fall out of the credit crisis.

The chancellor Alistair Darling has urged mortgage lenders to pass the recent interest rate cuts on to homeowners, saying it was time lenders ‘played their part’ after the Bank of England injected £15 billion into the financial system. After conceding on Friday that the present financial troubles are the ‘biggest economic shock since the Great Depression’, Mr Darling pleaded with banks to pass the interest rate reductions to ‘help homeowners, help businesses, [and] that will help all of us get through a very difficult time’. He also reminded the lenders of their duty to do all they can to avoid repossessions by reworking mortgages, offering people lower monthly payments and extending their terms.

Shadow chancellor George Osborne is expected today to pin the blame for the credit crisis directly on the government. In a speech to the Policy Exchange thinktank he is expected to say that the root of the problem is the failure of the government’s economic policy, that ‘after a decade of worldwide growth we have ended up with a housing boom, followed by bust, spending followed by debt, and a country finding it more and more difficult to compete’.

Meanwhile at a meeting of the Institute of International Finance (IIF) in Frankfurt over the weekend, bankers acknowledged that ’weaknesses in business practices’ including the management of risks may have contributed to the crisis. They say that they must improve their risk management and disclosure and compensation practices to help prevent a repeat of the current crisis. However they stop short of allowing greater regulation within the industry.

The Council of Mortgage Lenders (CML) has warned that mortgage lending could be ‘cut in half’ in 2008 if no extra funding comes from the Bank of England. Without the Bank putting into place incentives, such as allowing pension funds to buy mortgage-based securities, the CML believes that we will see an ‘ongoing process of attrition in mortgage choice’ that will tighten lending criteria, increase prices and lead to more products withdrawing from the market altogether.

And finally, a grandmother from Merseyside has applied for planning permission to demolish the home of Tesco chief executive Terry Leahy. In retaliation against plans to buy her home and 71 others under a compulsory purchase order to make way for Everton’s new stadium and a Tesco supermarket, Dot Reid plans to turn the Tesco boss’s house into a community garden. Ms Reid, who helped set up the housing cooperative under which they were given government money to build the homes said: ‘These are more than just houses, they are homes’.

Despite yesterday’s decision by the Bank of England’s to cut the base rate, many people will still be hit by higher mortgage costs after several lenders raised their charges last night. Nationwide, Royal Bank of Scotland, Alliance & Leicester and Britannia Building Society all raised their fixed rate deals. But several banks, including Halifax, Lloyds and Barclays, gave some respite to homeowners by reducing their tracker mortgage rates.

And it has been revealed that HSBC, which controversially promised to ‘match’ existing fixed-rate mortgages for those currently coming off deals, is intending to charge arrangement fees of up to £5,000. The fees would vary according to the rate being matched and the amount borrowed, and HSBC admitted some potential customers would find the amount prohibitive.

The European Central Bank (ECB) refused to cut the European base rate yesterday, and called on unions and companies to hold off wage demands and price increases to avoid adding any further inflationary pressure. Inflation in Europe is running at a 16-year high of 3.5 per cent, significantly above the target of 2 per cent.

The chancellor Alistair Darling is today expected to call for a new global early warning system to identify potential problems in the world economy, as part of a series of reforms to the International Monetary Fund. Mr Darling is particularly keen on creating a new council that would allow finance ministers to exercise greater control over the workings of the Fund.

A property research group, UKValuation has suggested that sub-prime lending in the UK could be a lot worse than assumed, as a large number of homeowners have more than one loan secured on their property. Particularly vulnerable are people who bought flats with a high loan-to-value ratio during the past few years.

And finally, yesterday’s story about ending ‘student ghettos’ in university towns has come under criticism from the British Property Federation (BPF). The BPF warned that any measure to avoid share housing would ‘go against government policies to support communities’. Imposing planning restrictions would choke supply, drive up rent and leave those most in need of affordable private renting without a home, they said.

The Bank of England’s monetary policy committee has lowered the base interest rate to 5 per cent as expected. It is the third cut since December and the bank hopes to spur on the economy. Business groups welcomed the decision and called for further cuts to shore up growth, but experts warn that homeowners on variable rate mortgages expecting to benefit from the cut will probably be disapointed.

The International Monetary Fund (IMF) has said that the world economy will grow much more slowly in the next two years than previously forecast. The IMF believe that world economic growth will slow to 3.7 per cent this year and next – 1.25 per cent lower than growth in 2007. The downturn is being lead by the US economy, which it predicts will go into a ‘mild recession’ this year. In the UK, growth will slow to 1.6 per cent over the next two years, affected in part by a weakening housing market and the contraction of the financial sector. The IMF warn that a global downturn might still be more severe than current predications, saying there is a one-in-four chance of a global recession.

The government is looking to tighten planning laws to end the concentration of student houses in university towns around England, which creates ‘ghost towns’ during the holidays. The department of Communities and Local Government (CLG) has commissioned consultants to investigate how the planning system can create ‘more effective management’ of houses in multiple occupation. Housing minister, Caroline Flint, said that it was unacceptable that people were having their quality of life affected saying: ‘We must have balanced, sustainable communities’.

The government has also quietly shelved plans to post progress reports of individual house sales on the web, after a 5-year, £4.6 million pilot scheme was met with ‘apathy’. The ‘chain matrix’ system was to be the centrepiece of the Land Registry’s e-conveyancing programme aimed at speeding up the process of buying and selling homes in England, and was supposed to make the process more transparent by creating a web page for each step in every transaction. However issues with privacy worried those involved, while conveyancers didn’t have the systems in place to interface with the software used, so the whole thing attracted less than half the participants hoped for.

A study by the Joseph Rowntree Foundation (JRF) has shown that child poverty could double over the next two decades as a result of the government’s approach to raising benefits. Increasing benefit payments in line with prices instead of earnings – which as been the standard practice for many years – was penalising the poor. If the practice continued, JFR said that the number of children living in poverty would rise from 18 per cent currently to 33 per cent in the next 20 years.

In America, the Bush administration has asked mortgage lenders to waive up to 10 per cent from the unpaid amount of 100,000 home loans, arguing that this would make it easier for the borrowers to repay the loans. The government is targeting borrowers who have made some late repayments in the past year, but have solid credit ratings otherwise. The government has also promised to guarantee any loans that a lender agrees to write down through the Federal Housing Administration (FHA), which would continue to make the payments if a borrower defaults. America has 46 million outstanding home loans, of which nearly six per cent were behind on their payments in the fourth quarter of last year.

And finally, our love of flat pack furniture is apparently waning as a result of the credit crunch. Ikea has said that the slowdown in the housing market was causing sales growth to fall across the world. However, it still plans to continue to open a further 20 stores in the UK this year and next, so you won’t miss out on your allen key fix altogether.

The Halifax house price index for March has shown the biggest monthly drop since September 1992. Prices are now only 1.1 per cent higher than a year ago. Analysts say that the weaker-than-expected figures from Halifax would raise expectations that the Bank of England would cut base interest rates to 5 per cent tomorrow. However, with the lack of liquidity on the Libor market (the intrabank exchange), a rate cut may not necessarily be passed on to mortgage holders.

Meanwhile, the Council of Mortgage Lenders (CML) said that the number of mortgages being lent for house purchase is at its lowest level for 16 years. Just 49,000 loans were made to buyers in February, 3.5 per cent lower than in January and 33 per cent lower than February last year. To make matters worse, Abbey National, the country’s third biggest lender, announced yesterday it too is scrapping its 100 per cent mortgage deals, the last lender to do so.

Analysis from Experian, the credit reference agency, indicates that 75,000 households could be plunged into negative equity this year. Areas of Manchester, south-east London and Birmingham are said to be potential ‘negative equity hot spots’ as the value of the average homes is only a small amount (around 20 per cent) above the mortgage on the property. The data shows that 47 of the 50 areas most at risk are Labour strongholds, and it is feared that banks and building societies are using the data to further refuse to lend people money.

The International Monetary Fund (IMF) has warned that potential losses from the credit crunch will reach $1 trillion (£500 billion) at least. The IMF says that losses are spreading from the sub-prime market in the US where there is a much ‘deeper and longer slowdown’ than expected, to other sectors such as commercial property and consumer credit. It also warns that tough measures and government intervention would be required if a house price crash was to be diverted. Gordon Brown moved to calm fears saying the situation was ‘containable’, and chancellor, Alistair Darling, said that the IMF had downgraded the UK by less than other major economies, and he was sticking to the economic forecast he made last month – that the UK economy would grow between 1.75 and 2.25 per cent in 2008.

But for first-time buyers, not all is lost. The government is to announce a new measure for getting first-time buyers and key workers on to the property ladder. The government has allocated £3 million, available in grants of £1,500, to help qualifying buyers with costs such as solicitors’ charges and furniture, for those who qualify to take part in the government’s Open Market Homebuy scheme.

And HSBC is bucking the trend by targeting more than one million mortgage customers who come off cheap fixed rate deals this year by offering to match existing deals for a further 2 years. The lender, which does not borrow from the money market to finance mortgages says ‘we’re in an incredibly strong position whilst others are stepping back’. HSBC borrowers will need to have at least 20 per cent equity in their property.

Efforts to cut carbon dioxide emissions and turn the UK ‘green’ are being undermined by the growing number of people living alone. A report from the Office for National Statistics entitled Social Trends, found that domestic energy consumption has soared by a third since 1970s because there are so many more homes to light. In 1971, 18 per cent of all homes were single-person households compared to today where 29 per cent of households are so defined.

There is no evidence that migrants were ‘first’ to council housing according to a report from the Equality and Human Rights Commission. New migrants, who make up 3 per cent of the population, account for less than 2 per cent of the number living in council housing. The report said that migrants tend to benefit from social housing after they have been here several years and become citizens.

And finally, a Canadian millionaire has left most of his fortune to a Devon seaside resort he visited on holiday. Keith Owen discovered that the only had weeks to live while on holiday in Sidmouth, and after falling in love with its quintessentially English qualities decided to hand over his pension fund and several homes, providing the town with an income of around £60,000 per annum. A committee is being established to decide how to spend the endowment.

People have been warned that even with big deposits, high incomes and good credit records they may still be refused a mortgage. Nationwide, Britain’s biggest building society, recently refused a mortgage request from a long-standing customer who had a 50 per cent equity in his £1.4 million property, a six-figure income and clean credit record, because he was self-employed.

Over at Cheltenham & Gloucester, brokers have been instructed that borrowers with more than £100,000 in bonuses should be referred to underwriters and will need to provide their bonus history for the past two years, while providing details of anticipated bonuses and the method they will be paid.

And Skipton, the sixth largest building society in the UK, became the first major lender to charge borrowers to take out a standard variable rate loan, leading to accusations that lenders were profiteering from the credit crisis. This all comes as figures out from Rightmove indicate that one in three housing deals is failing as lenders tighten their belts.

Increasing numbers of people who have mortgage shortfalls and other debts dating back as far as the 1990s, are now being threatened with court action. Last year, UK banks sold off a record £7 billion in unpaid consumer debts to collections agencies for a ‘pittance’. A growing number of consumers who lost their home in the 1990s are now being pursued by lenders who had previously let the debt slide, according to Citizens Advice,

These figures were announced as a senior member of the treasury select committee attacked the government for failing to help families threatened with losing their homes in the credit crisis. George Mudie called on the government to strike a deal with lenders to delay repossessions and help struggling homeowners through short-term difficulties. Nearly 40 Labour MPs have now signed a commons motion warning that a ‘large and growing number of houses’ will be repossessed because of the credit squeeze and urged councils to buy up empty houses and allow former owners to stay ‘under their own roof as council tenants’.

The Association of British Insurers (ABI) is calling on all new homes to carry a kitemark, proving they are built to withstand floods. The trade body, which represents 94 per cent of the UK home insurance market, has paid out more than £3 billion for 180,000 claims from last year’s flooding. It is calling on a minimum construction standard that would provide consumers with more confidence in a property’s ability to withstand a flood.

And finally, what do you give the billionaire who has everything? A billionaire housebuyer, who plans to turn a vacant London house into one of the world’s most expensive homes, found his new property came with everything – including a squatter. He is unable to remove the man who has been living on the grounds for the past 21 years, as he was awarded squatters’ rights last year. The house in Highgate, north London, is estimated to be worth £130 million when it is finished; less, of course, the £4 million for the small plot in the garden that Mr Harry Hallowes, the squatter, has rights over.

The International Monetary Fund (IMF) has warned that the UK is vulnerable to a US-style housing slump as a result of the overvaluation of house prices during the past decade. The IMF singled out the UK, Ireland, France and the Netherlands as the countries most vulnerable to a ‘painful correction’ over house prices. However the IMF tempered its warning, noting that since the massive increase in prices were not sparked by a housebuilding boom as in other countries like Spain, the economy was not in jeopardy from ‘imploding’. The IMF also argued that central banks should consider dampening excessive house prices with higher interest rates.

However it appears that the opposite will be true next week. Latest Bank of England (BoE) figures, out on Wednesday, indicate that lenders plan to reduce loans to customers and companies over the next three months, increase their charges and demand higher deposits, while expecting more borrowers to default. Many analysts expect a cut in interest rates of a quarter point, taking the base rate to 5 per cent. The BoE’s monetary policy committee are meeting again next Thursday to announce its rate decision.

A survey by credit reference agency, Experian, shows that one in five households has been so badly hit by the credit crisis that they are in danger of defaulting on their loans. The survey ranks the country’s parliamentary constituencies according to how many ‘sub-prime’ households there are. The division can be seen along geographical lines – the north being of greater risk. However, according to the analysis, most of the 5.1 million households in danger are in Labour strongholds.

Ministers faced charges of political opportunism after the announcement of the shortlist of ecotown sites yesterday, when opposition MPs said that 12 of the 15 locations would be in Conservative-held constituencies. While not opposed to the ecotowns in principle, Grant Shapps housing spokesperson for the Tories said ‘This smacks of political opportunism. Instead of delivering real change, Labour have cynically focused on imposing ecotowns on Conservative constituencies and not in Labour areas. The public deserve better than this’. The Campaign to Protect Rural England (CPRE) also said it was disappointed with the shortlist, with many sites threatening greenfield and agricultural land and landscapes.

Middle-income families are being forced to cut spending and take on second jobs because of financial pressures. Around 72 per cent of households with a yearly income of £30,000 or more said they will cut their spending this year, and a further 15 per cent said they will either have to get a second job or send a family member out to work. Fifteen per cent of those questioned by insurance firm Axa, blamed their cashflow problems on high house prices.

It was black Wednesday yesterday for homeowners, as figures showed mortgage approvals plummeting, debt spiralling and banks withdrawing their mortgages. Bank of England figures for February indicate that mortgage approvals are down nearly 40 per cent from a year earlier, the second lowest level for 15 years.

Meanwhile, following the lead of First Direct yesterday, a number of mortgage lenders are withdrawing their most competitive mortgages, including Scottish Widows which has scrapped its 100 per cent home loan. The Co-operative Bank has pulled its entire two-year fixed deposit mortgages, while Halifax, the UK’s biggest lender, is expected to restrict some of its lines this week. Since the beginning of March nearly 3,000 deals have been withdrawn from the financial market, leaving just over 4,700 products available.

At the same time, consumer borrowing using credit cards, overdrafts, and loans is rising at its fastest rate in five years. Unsecured borrowing rose by £2 billion in February, the biggest monthly increase since the Bank of England began compiling records in 1993. This figure includes an increase of £350 million in outstanding debt on credit cards in February, almost three times the increase in January.

And the bad news continues as three million families in Britain could enter negative equity within a year. Vince Cable, spokesperson for the Lib-Dems, said that one in four households could find the size of their mortgage dwarfing the value of their house, as the cost of credit goes up. The warning is based on the assessment that there are around three million people whose mortgages currently accounts for 90 per cent or more of their home. If the prices fell by 10 per cent over the next year, they will find themselves in negative equity.

In America, Federal Reserve chairman, Ben Bernanke, came close to conceding that the American economy may yet slip into the grip of a recession. In testimony to the US Congress, Mr Bernanke admitted that the US faced a grim first half of the year: ‘It now appears likely that GDP will not grow much, if at all… and could even contract… Clearly the US economy is going through a very difficult period.’

In other news, the 15 locations shortlisted for the first new towns to be built in England for 40 years have been revealed, with the final 10 sites to be confirmed in the next six months. The shortlisted locations for the eco-towns have the potential to provide affordable housing and the ‘highest green standards that we can expect’, according the housing minister, Caroline Flint. The plans have proved controversial and most of the sites are expected to face local opposition.

Shelter co-hosted a major housing and homeless debate between the three main candidates in the forthcoming London mayoral elections. All three candidates publicly pledged to end rough sleeping in the capital by 2012, however they diverged on their plans to create more affordable housing for London. During the debate, Boris Johnson managed to annoy some with his boast that his large Islington house was worth ‘shedloads of money’.

Homeowners are not willing to make changes to live in ’zero carbon’ new eco-friendly homes, according to a report. People are too worried that their cost of living would be higher and the maintenance would be more demanding; as well as having to cut back on certain appliances. The National Housebuilding Council Foundation (NHBC) said that these results were unsurprising due to the lack of involvement the public have had regarding the building changes. They concluded that until people have more of an understanding, they are going to be unwilling to buy these new houses.

A committee of MPs from the department for community and local government (CLG) has also joined in the green debate, saying that the government must do more to improve the energy efficiency in existing homes. The committee said that the current housing policy ‘risk neglecting the environmental impact’ of over 25 million existing homes, a quarter of which were built at least 90 years ago and which emit nearly twice as much carbon as new homes. Environment Secretary, Hilary Benn, agreed that making existing houses more energy efficient was required and ‘imaginative solutions’ were needed, including a national roll out of ‘smart meters’ to help people monitor their energy use, stamp duty rebates for people who make their homes more efficient, and using the energy performance certificate contained in the home information packs for homeowners seeking planning permission.

Annual house price growth in England and Wales has continued to fall although prices remained unchanged in February, according to the Land Registry. In February the average house price was £185,616, the same as the previous month. Yet, this cut the annual price change to 5.3 per cent, the sixth fall in a row, confirming a weaker market. London has also shown its first monthly dip for a while with prices down by 0.4 per cent.

First Direct has temporarily withdrawn its mortgages to individuals who are not already their customers. With so many other providers having withdrawn their mortgages or raised their interest rates, including NatWest, Scottish Widows, and Nationwide, this has left some smaller banks and building societies unable to cope with the level of demand for their mortgages. First Direct said that it has had five times its usual level of applications. A spokesperson for the bank said that: ‘We want to be back in the market as soon as possible.’

And finally, a woman who took out a loan for ‘home improvements’ and then used the money to fund an attempted contract killing on her husband, is facing trial. The woman, who denies soliciting murder, ‘flattered’ her neighbour into helping her; although the neighbour said he had no intention of going through with the plan and instead contacted the police.

A parliamentary report has concluded that houses will become unaffordable for millions of Britons as a higher influx of immigrants will mean higher house prices. According to the House of Lords economic affairs committee, if net immigration of 190,000 people per year continues over the next 20 years, it will cause the cost of an average property to rise to more than 10 times the average wage, whereas in 2000, the average cost was only four times the average wage. Ministers now forecast that by 2031 the population will be 71 million, up from 60.6 million in 2006, due to net immigration and this level of immigrations will exert a ‘significant impact on the housing market’.

Gordon Brown is facing his largest backbench revolt since the start of his premiership, over council tax repairs. Thirty Labour MPs have rebelled against the government, to call for more money for council housebuilding and repairs, during the first and second amendment readings to the Housing and Regeneration Bill. Labour MP, Michaal Meacher said that the need for social and affordable housing ‘far exceeds’ government’s plans, and that relying on the public sector to build the required homes was ‘unrealistic’.

In the meantime, the Tories are hoping to use today’s debate on the Bill to force a vote on abandoning home information packs (Hips). Arguing that more than half of the packs are over the target price of £350 and only one in eight is being produced within the predicted time of four to five working days, the conservative housing spokesperson, Grant Shapps, said that ‘everyone involved, be it experts or consumers, recognises that Hips have failed in every aspect’. His views are backed by the National Association of Estate Agents who found that most of its members believe that the packs had not speeded up the selling process or giving buyers any more useful information.

The construction sector has dramatically slowed down to its lowest level in more than a decade, which has put the government’s housing target under threat, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS). RICS said that 1 per cent more surveyors reported a rise in workloads than a fall during the first three months of 2008, compared to 16 per cent for the final three months of last year. The worst hit sector was the private housing market, which suffered negative workload growth for the first time since 1999.

And in research by auction house, Allsop, just four per cent of new build flats sold at auction over the past three years made a profit, with the value of the average flat plunging 26 per cent. Allsop also said that the outlook for new build flats was ‘grim’, and blamed the problem on massive oversupply, set to get worse as the number of distressed sales is rising ‘steeply’. A common problem was found to be buyers not being able to afford to pay their mortgage after failing to find tenants.

And finally, a home in the suburbs can add 12 years to your life. People living in middle class estates on the outskirts of a market town can typically expect to live until they are nearly 90 years old, whereas those living in council estates closer to the centre of the same country town are likely to die before they reach their late 70s.