Lunchtime news Thursday 10 April 2023

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.