Lunchtime news Wednesday 30 April 2023

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.