Lunchtime news Tuesday 15 April 2023

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.