ROOF Blog archive

The department for Communities and Local Government yesterday released its land use change statistics for England for 2007. The report looks at previously developed land (either brownfield or created through building conversion), greenbelt, and areas of high flood risk. The 2004 Spending Review laid down that 60 per cent of new housing development should be on previously developed land. Last year, 75 per cent of dwellings were built on previously developed land, down from 76 per cent in 2006.

Consumer confidence has plunged to its lowest level since the early-1990s, with fears of a recession now commonplace. Falling house prices and the rising cost of living have damaged confidence in the economy, and the index measuring it has plummeted in the past year, while expectations for the wider economy has fallen to its lowest level on record.

However, Moodys the credit ratings agency has said that Britain’s banks and building societies could absorb a 20 per cent fall in UK house prices without eating into their capital reserves. A 50 per cent fall in house prices would however leave banks needing fresh capital.

Almost half the properties going to auction are failing to sell on the day, as buyers hold out for a bargain. According to figures from the Essential Information Group, only 57 per cent of listed residential properties are being sold at auction in April, the lowest percentage since 1991. The figures show that 10 per cent are sold after the auction has ended, up by half in the past five years, as potential buyers wait to see if the property reaches its reserve price before making a lower offer. Almost a quarter of auctioned properties are repossessions.

In an ominous sign, Northern Rock is to more than double the number of people working in its debt management arm, according to the BBC, which broke the story about the crisis facing Britain’s big mortgage lender. The figures suggest that the Rock is expecting a huge increase in the number of people having trouble paying their mortgage, as it attempts to reduce the value of loans from £100 billion to £50 billion as part of the plan to repay government borrowings.

And finally, in its first global commercial property survey, the Royal Institution of Chartered Surveyors has seen demand for retail and industrial sites fall worldwide. The number of transactions is down in Eastern Europe and South America, while the rate of growth has stagnated in the Asian markets.

House prices have recorded their largest monthly fall since 1992, says Nationwide building society. Prices fell 2.5 per cent during May according to its latest monthly survey, bringing the year on year figure down 4.4 per cent. Nationwide said that it was the seventh consecutive month of falling prices, and price falls were now accelerating.

Abbey, the UK’s third largest lender, raised its fixed rate mortgage rate by 0.56 percentage points blaming a sudden increase in the cost of inter-bank borrowing following last week’s inflation report by the Bank of England. Abbey recently raised the minimum deposit from five to 10 per cent and restricted interest-only mortgages to borrowers with at least 25 per cent equity. It said that market changes required them to pass on these increases.

Labour peer Lord Rogers, speaking at a building conference yesterday, described eco-towns as one of the government’s biggest mistakes. He argued that eco-towns encroach on greenbelt land, damaging both rural and urban environments, increase road congestion and carbon emissions, and are environmentally unsustainable. He added that government should concentrate on the regeneration of towns and cities rather than build new ones.

Lord Rogers’ comments were timely, coming as the Empty Homes Agency yesterday released its latest figures on the number of vacant houses in England. Between 2006 and 2007 the number of homes remaining empty has risen by nearly 10,000 to 672,924 – the first increase in nearly a decade. As the statistics date from before the credit crunch, the Agency said that the problem was likely to get worse. The most significant rises have been in large towns and cities in the north such as Leeds, Liverpool and Oldham where the increase has been up to 70 per cent in some areas.

And finally, the Royal Institute of British Architects (RIBA) has announced Britain’s best new buildings, and the result is unlikely to please everyone. Of the 92 buildings winning an award, most represented contemporary modern architecture, and RIBA has been heavily criticised for ignoring traditional styles. RIBA conceded there was little traditional architecture on its list with one of the judges saying that while there is no prejudice against traditional architecture it was simply that their quality was not good enough. Some of the winners include St Pancras Station, Heathrow’s terminal five and Wembley Stadium.

Yesterday figures from the British Bankers’ Association revealed that the UK mortgage market is subdued despite a slight recovery in April. More than 38,000 new mortgages were approved for house purchases in April, up from 35,500 in March, but the figure was down 39.4 per cent from the same time a year ago. The figures also show a sharp rise in the number of people remortgaging.

Credit ratings agency Standard & Poor’s has also released figures showing that more than a fifth of subprime borrowers have fallen behind on their mortgage. The number of borrowers who are behind for more than 30 days has increased from 19.4 per cent in the final three months of 2007, to 21.7 per cent in the first quarter of 2008; and those falling at least 90 days behind with repayments is now at 10.6 per cent. S&P’s figures also indicate that even ‘prime’ borrowers are falling into arrears in slowly increasing numbers.

Meanwhile, according to insurance company Axa the number of repossessions could be worse than 1992, as it estimates as many as 1.8 million buyers could struggle to afford their monthly repayments by the end of this year.

However the chief of HSBC - the biggest bank in Europe – has accused central bankers of failing to address inflation and called on them to raise interest rates to curb spending, even if it hurts consumers . He added that some economic decision-makers were ignoring the risk of inflation because they were keen to support ‘ailing house markets and preserve a feel-good factor’.

Average first-time buyers are now spending almost half their income on mortgage payments for the first time in almost 20 years, according to data from Nationwide. At the highest level since 1990, the height of the last housing crisis, first-time buyers are handing over 49 per cent of their post-tax income on morgatge repayments, and with the recent fall in disposable income as inflationary pressures grow, the building society believes the situation will deteriorate.

And finally, a record number of complaints were lodged with the Financial Ombudsman about financial services companies during the past 12 months. The number of complaints increased by 30 per cent, including a six-fold increase in the number of people complaining about payment protection insurance. The Financial Services Authority has warned, in a move to improve transparency, that banks and financial services companies may have the number of complaints made and how they handled them made public under proposals to compile a ‘league table’ of poor service

The number of properties sold in 2008 is likely to be the lowest for 30 years – and 30 per cent below last year’s figure. This is the news from the housing website Hometrack, which reported that house prices fell 0.5 per cent in the past month – the eighth successive month prices have tumbled. Prices are being slashed in a bid to attract fewer buyers and properties are staying on the market longer.

The bad news continued as the Council of Mortgage Lenders warned that up to 100,000 homes could be pushed into negative equity by the end of the year because of the credit crunch, while house prices will be around 7 per cent lower by the end of this year compared to last year. A spokesperson for CML said that about one borrower in 120 could be negative equity, but for most households, the amount would be ‘extremely small’ (not more than a few thousand pounds) and would only be a problem ‘in practice’ if a household wanted to move or had repayment difficulties.

Meanwhile, millions of homeowners who use mortgage brokers are being denied access to the best deals. According to the Association of Mortgage Intermediaries, the banks’ decision to deprive brokers of the best deals and sell to customers who approach them directly, has led to a fall in the number of mortgage advisers. Since the credit crunch started last year the industry has lost around 15 per cent of its members and the number of deals available through brokers has fallen by almost half in the past three months – from 32 per cent to 17 per cent of the market.

Rough sleepers in London are claiming that City of London Corporation cleaners are deliberately waking them up during the night, in a campaign to force them into hostels. The Corporation admitted it was taking a ‘more assertive approach’ to rough sleepers.

Staying in the capital, a west London council was ordered by the high court to pay nearly £100,000 in damages to a couple with learning disabilities who were terrorised by a gang of ‘feral’ youths in the their own flat. Although Hounslow council argued that it had no duty of care to the couple, the court ruled the council was negligent in failing to move the couple before the attack. The ruling is the first to hold that a council is liable to protect vulnerable adults as well as children.

And finally, if you value good neighbours, you may not want to move to Scotland. According to a poll for the Metro newspaper, neighbours in Edinburgh and Glasgow are the least friendly and most likely to clash with one another. In contrast are neighbourly sorts from the West County and East Midlands who were found to be the most friendly. The most common complaints, suffered in nearly half of all arguments, came from noise.

The downturn in property sales is having a positive affect on buy to let according to a survey of residential lettings by the Royal Institution of Surveyors (RICS). It appears that weaker demand to buy houses has forced would-be sellers back to the rental market where yields are rising. RICS is reporting a rise of 29 per cent for the quarter to April, in instructions to let property. This compares to a 2 per cent fall three months before. A spokesperson from RICS said: ‘Many are taking advantage of rising rental yields while they wait for the credit crisis to abate’.

This has been confirmed by Paragon, the UK’s third largest buy-to-let mortgage provider, which yesterday reported a 39 per cent fall in first-half profits. The company has effectively been closed to new lending because of the credit crisis, receiving just £988 million in the first half of the year compared with £2.12 billion for the same period in 2007, however it stressed that its £11 billion mortgage book was ‘high quality’ with an average loan-to-value of 66 per cent. Paragon chief executive added that professional buy-to-let investors may even see this as ‘an opportunity to buy properties at attractive prices’.

Meanwhile the value of mortgages agreed by the Nationwide Building Society last year fell 40 per cent as credit conditions led it to scale back lending. The building society said it does not expect the worst of the credit crisis to be over until the first quarter of 2009 at the earliest. It’s pre-tax profit rose 5.2 per cent for the year to 4 April.

The director of the Institute for Fiscal Studies has warned the government’s abolition of the 10p income tax rate would hit homeowners heavily. Pumping so much money into the economy would send inflation higher which would mean that the Bank of England would need to keep interest rates on hold or push them higher, putting pressure on the mortgage market.

The chairman of the Home Builders Federation said yesterday that sales of newly built houses have ‘fallen off a cliff’ in the past few weeks. And problems are escalating rapidly despite intervention from the Bank of England: ‘The slowdown last autumn was miniscule compared to what we are seeing now… The implications for the economy are dire. Tens of thousand of jobs are at risk, possibly even more…’

And finally, although one of its towns is on the shortlist, Harborough District Council in Leicestershire has officially aligned itself with a protest group set up against proposals for eco-towns. Councillor Steve Charlish said the government’s process of consultation was unsatisfactory and needed to happen in public view. ‘Even now the community hasn’t really got an idea of what’s going on… There is a lot of fear from the community about the whole process’.

Shelter Scotland has warned that almost a third of Scottish homeowners with a mortgage have no savings or investments and are one pay packet away from a housing crisis. Shelter has been calling for big improvements to the safety net to support people with mortgage difficulties and other measures such as better recording of the numbers of repossessions.

Paragon thinks rents will rise between 10 and 11 per cent during the next two years, while house prices will fall by 20 per cent in the same time. As people are reluctant to buy homes while prices are falling, demand for rental properties has increased. And within the buy-to-let sector, investors are either no longer so keen to buy flats to rent out or are unable to gain a mortgage, so the number of rented properties is not expanding. Average rents have already increased 14 per cent to more than £1,000 over the last year.

And to reinforce this point, Cheltenham & Gloucester yesterday announced as from the close of business that it had withdrawn its entire range of home loans from the market, and would replace them with more expensive products. Most rates are expected to increase by 0.25 per cent.

According to an independent adviser to the prime minister on sustainable development, the 15 shortlisted eco-towns at the centre of the government’s housing plans risk increasing social division by diverting money and political will from improving existing towns and cities and may increase commuting time unless there were enough jobs created.

The Audit Commission, in its biennial fraud study in England, has found that record levels of benefits have been stolen or overpaid. The commission estimates that £140 million – a rise of 26 per cent since the previous audit and including £24 million in housing benefit – has been overpaid, and it accuses local authorities of not doing enough about it.

After a long legal battle, MPs have lost the right to keep details of their expenses secret after they decided not to challenge the decision. The Commons members’ estimate committee said it would publish claims of all 646 MPs’ expenses, including details of mortgage repayments, household bills, cleaning, repairs and rent relating to the controversial second homes allowance. The first lot of named MPs including David Cameron and Gordon Brown will be released on Friday.

The Local Government Association claims that, in the next two years, a million more people will be on the waiting list for social housing. About four million are already waiting for a council or housing association home, and the LGA says that the high cost of house buying, a lack of credit and curbs on the number of homes being built will push the figure up to more than five million. It is calling on councils which are struggling to meet demand for social housing to be given greater freedom to borrow and remortgage assets to invest in housing stock.

Conservative leader David Cameron launched his party’s Homelessness Foundation yesterday, saying that it is a ‘disgrace’ that people are sleeping on Britain’s streets. The foundation has been set up for the Conservative Party to ‘get back to its roots’; look at the causes of homelessness such as poverty, mental illness, unemployment and housing shortage; and come up with solutions to ease the problem. Mr Cameron has proposed greater links with the voluntary sector, and has offered to ‘hopefully put things into practice straight away’ after the party won the majority of councils and London mayoralty in the recent local elections.

Communities and Local Government figures on house building in England show that the number of new starts has slumped to its lowest level for nearly a decade. There were 32,100 new housing starts in England in the first three months of the year ,which was 21 per cent lower than the previous quarter and 24 per cent down from a year ago. The greatest drop has been among private house builders.

Yesterday’s announcement by the Bank of England that ‘worse is to come’ with inflationary pressures prohibiting further interest rate cuts, sent the Libor (interbank lending) rate up for the second day running. Until Wednesday, the rate had been falling for three weeks. After the Bank’s inflation report was released, three-month sterling Libor increased to 5.84 per cent, pushing the average rate for a two-year loan to 6.64 per cent, its highest for eight years.

In a draft version of the Queen’s speech yesterday, Gordon Brown announced a £100 million ‘leg-up’ on the property ladder for first-time and low-income house buyers. For the first time, these groups will be able to buy new homes through a shared ownership scheme that had previously been limited to key workers. Anyone with a household income of less than £60,000 will be eligible. A further £200 million fund would also be made available to allow unsold new homes to be sold to housing associations. These homes would then be rented to tenants. The PM said: ‘our immediate priority… is to help family finances’. The Conservatives accused the government of taking many of the tories policies.

While Mr Brown said that he was the right man to steer the country through the difficult economic times ahead, governor of the Bank of England Mervyn King warned that there was worse to come. Households should tighten their belts even further in the wake of soaring energy bills, food prices and imports, said King. ‘For the time being at least, the nice decade is behind us’ he said, and added that the housing market will continue to fall after worsening ‘markedly.’

The Office of Fair Trading (OFT) is to launch a probe into whether people facing repossession are adequately protected in sale and rent back schemes. Since ROOF’s investigation into the schemes, where households in difficulty sell their house at a discount to investors and in return become a tenant in the house with the option of buying it back at a later date, more and more consumer groups and charities have called for regulation of the schemes. It is estimated that 20,000 people sell their homes to mortgage companies each year. The OFT is expected to report on its findings by September.

First-time buyers are increasingly looking to intermediaries to help them get a mortgage according to the Association of Mortgage Intermediaries (AMI). More than 82 per cent of first-time buyers used an intermediary in the first quarter of 2008, which is a 10 per cent rise from the previous year. Figures also show that intermediaries are responsible for 79 per cent of the all remortgages, also up 10 per cent from the same period in 2007.

And finally, in London most would-be homeowners are now facing a catch-22 situation. As mortgage finance dries up and many first-time buyers are unable to get a mortgage, rents are increasing faster than inflation meaning that people cannot save enough for a deposit on a property. The figures, compiled by Winkworth, show that rents have increased by an average of around 8 per cent compared with last year. For two-bedroom flats the increase has been up to 15 per cent in some areas. Winkworth estimates that rents will rise by a further 5 to 10 per cent over the coming year.

Housing minister Caroline Flint accidentally revealed that experts believe house prices could fall by ‘at best’ 5 to 10 per cent, and they also expressed concern over meeting the target of three million new houses. Photographed carrying notes into a Cabinet meeting at No10 yesterday, Ms Flint has shrugged off the incident and insisted that the notes reflected expert analysis, rather than government forecasts. Shadow housing minister Grant Shapps said it showed that ministers were painting one housing market scenario in public and the exact opposite ‘behind closed doors’.

After Redrow yesterday, today Barratt Developments has reported falling sales and rising cancellation rates as conditions in the market deteriorate ‘significantly’. Barratt said that the ‘unprecedented’ drop in mortgages and lower consumer confidence had brought reservation rates down by a third against the same period last year, while cancellation rates have been running at about 25 per cent since the beginning of the year, and currently rising.

Hopes of interest rate cuts are in doubt as inflation rises to 3 per cent. The soaring costs of food and fuel has triggered the largest jump in inflation for six years, and analysts are now saying that rates may need to be kept on hold (at 5 per cent) for the rest of the year.

Meanwhile, Bradford & Bingley is raising £300 million in an emergency rights issue this morning to shore up its balance sheet on mortgage accounts. It is only a few weeks since B&B denied a report that it was contemplating a rights issue. In answer to why B&B did not announce the rights issue with its interim statement on 22 April, the chief executive said that a ‘month makes a big difference’ and it was a more stable environment now to make the announcement. Alliance & Leicester is set to pull £14 billion of capacity from the mortgage markets after its balance sheet fell £1.5 billion in the first four months of the year, reducing an already under-funded sector, and heaping more misery on first-time buyers.

And finally, falling house prices are making it harder for couples to divorce. Where the family home is a couple’s main asset it will usually have to be sold as part of the settlement, but with mortgages becoming hard to come by and many buyers holding off in the hope that prices will fall, properties are harder to sell and some couples are putting off divorce proceedings.

According to the Council for Mortgage Lenders, mortgage lending fell during the first quarter of 2008 to its lowest level for more than three decades. From January to March, new mortgages slumped to 142,000, below the 146,000 recorded in early 1992 when Britain was in recession. Remortgaging has remained ‘resilient’, actually increasing in the first quarter to its highest amount for three years, but CML has put this down to the large number of borrowers coming off short-term fixed rate deals.

The latest survey from the Royal Institution of Chartered Surveyors shows that the number of surveyors reporting a fall in property prices has risen for the ninth month in a row. Meanwhile the number of house sale completions during the past three months has fallen significantly, with an average of 18 sales per surveyor. A RICS spokesperson said that there are ‘very real implications, not just for the property industry but also for the high street and the wider economy’.

Housebuilder Redrow and Northern Rock have both added to the financial gloom. Redrow has reported rising cancellation rates as its order book is down 26.5 per cent from a year earlier. The housebuilder said sales and prices have come under pressure as a result of the tough market conditions and the restrictions on mortgage financing. While recently nationalised Northern Rock has seen the number of homeowners in arrears nearly double. The number of mortgages in arrears for at least three months stood at 0.95 per cent of the total lending, up from 0.57 per cent at the end of December.

A shortage of skilled construction workers is jeopardising ministerial targets to build three million new homes, revamp schools and deliver the Olympics facilities. After surveying 1,200 companies, the Chartered Institute of Building indicates that nine in ten employers report a skills shortage, with four in ten saying that skilled manual trades were ‘very difficult’ to fill. The majority of companies said that the situation was likely to worsen this year.

And finally, Gordon Brown has proposed an ‘age insurance’ scheme to safeguard the elderly as he launched a consultation into care. The scheme is intended to address the ‘black hole’ in public finances caused by increased life expectancyand is likely to involve compulsory payments throughout an individual’s working life, which would be spent on care during old age or infirmity. Health Secretary Alan Johnson said that pensioners should not have to sell their houses to pay for nursing home care.

From tomorrow, Halifax, the UK’s largest mortgage lender will force borrowers with small deposits who do not use a broker to open current accounts before they can get a mortgage. The move is seen as an attempt to boost the bank’s cash deposits. A spokesperson for the bank said that ‘wholesale money continues to be significantly more expensive than a year ago. Unfortunately this increased costs needs to be passed on to new customers’.

BBC research has found that more people want house prices to fall than to rise – 28 per cent compared to less than a quarter of those polled, with most people wanting prices to stay the same. More than 60 per cent said that a price fall of more than 10 per cent would not make them any more likely to cut back on household spending. And house prices would have to fall by 56 per cent to put the average mortgage borrower in to negative equity. The findings cast doubt on whether the political and economic damage done by falling prices is as serious as had been feared.

The number of unsold homes on the market has risen to more than one million, a 15 per cent increase on the same period last year. The figure, calculated by Rightmove.co.uk covers nine out of ten of all homes on the market and shows that not only are there more homes on the market, they are taking on average two weeks longer to sell.

Nearly one in ten British households will be millionaires within a decade, despite the global economic slowdown and falling property prices. Analysis by the Economist Intelligence Unit and Barclays Wealth shows that the number of households worth £1 million or more will increase from 1.5 million to more than 2.4 million, with those worth £5 million set to more than double by 2017. However Britain is forecast to slip behind China in the global wealth index, but remain the fourth wealthiest nation after the US and Japan.

The Bank of England is expected to admit this week that it is set to breach its inflation target in the coming months and warns that Britain is destined for two years of soaring costs and weak growth. Mervyn King is expected to unveil a consumer price index forecast of more than 3 per cent in the coming months, and will cut its economic growth forecast for this year and next. The warning comes as house prices decrease and repossessions rise, and the bank is expected to cut borrowing costs at least once, perhaps twice, in the coming months.

And finally, the inaugural World Architecture Festival award, backed by 26 architectural magazines from five continents, has been announced. Any new, converted or restored building in one of 16 categories such as places of worship, theme parks, public toilets or prisons, could win the title of best new building in the world. The festival takes place in Barcelona in late October.

Yesterday the Bank of England kept interest rates on hold at 5 per cent.

The number of homeowners facing repossession action in England and Wales has increased 16 per cent in the first quarter on 2008. The figure, from the Ministry of Justice, covers the number of mortgage repossession claims before the courts, which is the first stage of the repossession process. The number of possession orders issued as a result of claims – which, if implemented, could lead to eviction – was also up 9 per cent in the past quarter.

Ahead of the repossession figures, the government announced details of a plan to help struggling homeowners. A package worth £9 million over three years will provide free legal advice for homeowners facing repossession proceedings, and specialist training for debt advice agencies set up through the National Housing Advice Service. Housing minister Caroline Flint said that the fundamentals of the housing market remain strong, with high employment, low interest rates and long-term demand for homes from first-time buyers.

The number of homeless young people in England and Wales has fallen in the past three years, but not in Scotland or Northern Ireland. The report, by the Joseph Rowntree Foundation, revealed at least 75,000 young people in the UK experienced homelessness in 2006/07, but said that number was likely to be much higher as the figures only count those in contact with homelessness services or agencies. Women are more likely than men to be homeless and the main cause of homelessness was the breakdown of relationships.

Remember Home Information Packs (Hips)? From 1 June, Hips were to be completed before a property was put up for sale. But now the government has to back down and moved the date back to the end of the year. At present, a Hip is only required after the property is put on the market.

And finally, the farmer who built a mock-tudor castle on his land without planning permission and hid it behind haystacks for four years (see Lunchtime news Friday 25 January) has lost his appeal to prevent the home being demolished. After hiding the house behind bales of hay for four years, the farmer claimed no one had filed a planning complaint and he should be allowed to keep it. He has been given 12 months to knock it down.

The Building Societies Association (BSA) chairman has said that mortgage markets will take two years to recover from the credit squeeze. Iain Cornish added that once recovered, the market will be very different to the early years of this decade, and that a more ‘sensible’ market should return in the long run. The credit crisis has not caused building societies as much pressure as the banks, as the former generally do not have the same reliance on wholesale funding as some of the major banks – they are ‘well capitalised, highly liquid and prudent’.

However the Financial Services Authority (FSA) said that building societies were accumulating too much risk in buy-to-let mortgages and failing to understand the risks, while warning some of them had been too slow to react to the credit crunch. The chief executive of the FSA said that building socieites were not preparing for ‘extreme stress scenarios’ and may need to tighten their lending criteria.

In America, the US Treasury Secretary Henry Paulson has said that the worst of the credit crunch may have passed. The turmoil in the financial markets that had lead to massive worldwide losses has eased, however he acknowledged that the US economy was facing tough times still with soaring petrol prices and a weak job market.

Rural communities are being destroyed by an ’urban exodus’ of middle class families unable to buy in city centres. A report by the Campaign to Protect Rural England (CPRE) said that villages are struggling to cope with the extra pressure placed on services and greenfield land. It calls for the problems to be tacked by reviving urban communities through the building of high-quality, high-density housing. The report estimates that London has lost 800,000 people to the surrounding areas, most of them because of housing concerns.

And finally, peers in the House of Lords are calling on the government to review inheritance tax laws regarding exempting cohabiting siblings. The issue was raised in question time following the story of the two unmarried sisters who had lived together for decades, who failed in their battle to avoid paying tax on the death of the other. Baroness Hollis of Heigham said that death duties should be deferred until the death of the second relative.

The head of Southern Housing Group – one of the UK’s largest housing associations – has warned that the shortage of lenders has made it hard for housing associations to plan developments, and is threatening the government’s housing target. Tom Dacey said that at the peak of the housing boom only 180,000 homes were being built, and now with only two out of seven lenders in the market taking on new business, he feels the government target is no longer feasible. The government has pledged to build 240,000 a year by 2016 to reach an overall target of three million new homes by 2020.

One of Gordon Brown’s advisers, Stephen Nickell chairman of the National Housing and Planning Advice Unit, has warned the Prime Minister that struggling families and first-time buyers are being shut out of the mortgage market as banks ‘ration’ home loans. Saying it was almost impossible for first-time buyers to secure a mortgage, young families and professional couples were forced to rent rather than aim to own their own home.

However the number of repossessions has soared – more than 95,000 repossession orders were issued during 2007, with the last three months of the year recording a 6.3 per cent increase alone. It is believed that the figures do not fully reflect the housing downturn which became much more acute in March. Figures from the Ministry of Justice revealing repossession numbers for the first three months of 2008 are out on Friday, and are expected to show the influence of the rationing of loans.

First-time buyers have borne the brunt of a fall in house prices in London. A survey of sales prices across 15 districts in March covering all types of housing developments from one-bedroom flats to family homes, has shown that one and two-bedroom flats, typically purchased by first-time buyers, have seen the biggest falls across the capital, and the lower prices are pushing buyers into negative equity. On average prices have fallen by around 10 per cent in popular areas such as Battersea and Islington.

Estate agents are closing branches at a rate of 150 a week, with 4,000 job losses since the start of the year, while removal firms have also laid off hundreds of staff after a 26 per cent fall in the number of properties changing hands. A spokesperson for the National Association of Estate Agents said that there was no shortage of people who wanted to move house, it’s just that there aren’t enough mortgages, so they can’t.

The Bank of England’s monetary policy committee is due to meet again on Thursday. It is expected to maintain interest rates at 5 per cent, although some believe that a quarter point cut may be due by June.

And finally, fear not – the economy isn’t about to go down the gurgler – scotch whisky sales are booming. Regarded by some as the ultimate barometer of economic prospects, it is a global product sold in more than 200 countries and has historically followed the global economic trends. So it is good news then that 2007 was a bumper year both in terms of export volumes and worth, even though the US the world’s biggest scotch whisky market, has seen a slowdown in sales.

Halifax, the UK’s biggest lender reconfirmed the annual fall in house prices today with the release of last month’s house price index. There was a year-on-year decrease of 0.9 per cent, with prices dropping 1.3 per cent in April alone, and a 4.2 per cent fall in the first four months of the year. The lender expects a ‘mid single-digit percentage’ decline in prices during 2008, with bigger falls for Wales and the West Midlands, while Scotland may possibly buck the trend with a slight increase in prices.

Yesterday, the National Institute of Economic and Social Research predicted that household spending will grind to a halt this year and leave the UK economy in ‘its most precarious position in over a decade’. It says that Britain faces a two-year stretch of economic weakness and lacklustre growth as the consumer and housing boom ‘is worked off’. It estimates that the economy will grow by 1.8 per cent this year and next, and it has cut its forecast for 2009 by half a percentage point.

Demand for rental homes has pushed the cost of renting through the £1,000 barrier for the first time. The average cost of renting in England and Wales rose 4 per cent during the past quarter and 12 per cent during the past six months, according to Paragon. It said that rents were rising because of the extra demand from those who are unable to get a mortgage or did not want to buy because of the state of the housing market. They indicate that the trend is likely to continue.

Information from the Office for National Statistics shows that demand for new homes has plunged by 27 per cent during the first quarter of 2008, leading to an 8 per cent decline in overall orders for new construction. Falling orders in private housing were the most pronounced, declining 29 per cent compared to the first quarter of 2007. Public housing and housing association orders also declined by 27 per cent. Last week housebuilders Persimmon and Taylor Wimpey announced that orders had fallen by 24 and 26 per cent respectively during the first four months of this year.

And finally, a quarter of primary school children are expected to miss out on their first choice of school. The situation is worst in London and the South East. In Kingston-upon-Thames for example, only three quarters of parents were offered their first choice school, and the local authority admits that it has been unable to find any place at all for 10 per cent of students. A spokesperson for Kingston council said that the surge in applications appeared to be a result of an unusually high number of newcomers to the borough.

The Bank of England (BoE) warned that the correction in the credit markets had gone too far and banks and financial markets were too pessimistic and at risk of making the financial crisis a self-fulfilling prophecy. The Bank’s twice-yearly financial stability report says that the credit markets had ‘overstated the losses that will ultimately be felt by the financial system and the economy as a whole’. The report added that there was a ‘significant increase’ in risk that a major bank collapse or reluctance to lend would disrupt the financial system, and the process of adjustment is proving even ‘more prolonged and difficult’. The bank believes however, that financial institutions will soon regain their risk appetite in the coming months.

Perhaps the BoE’s renewed positivity for the economy has something to do with the reduction in tax revenue the government is experiencing as the credit crunch continues. It’s estimated that the chancellor will plunge at least £16 billion deeper into the red over the next two years as tax receipts, particularly in income tax, stamp duty and VAT, dwindle. It will limit what the chancellor has available to offer in pre-election ‘giveaways’ or extra spending power should the economy tip into recession.

Bankers hit back at comments (reported yesterday) by the governor of the Bank of England Mervyn King regarding their multi-million pound bonuses. The British Bankers’ Association went on the offensive yesterday saying Mr King should avoid wading into the row over bonuses, when, as a financial services industry, many jobs are currently hanging on the line. Most bankers dismissed the comments as a ‘giant red herring’, saying the governor was just trying to deflect attention away from the central bank during a difficult time.

Meanwhile, in America, the Federal Reserve cut interest rates by a quarter percentage point, to 2 per cent yesterday. It is the seventh consecutive reduction in rates. It signalled that there would be a ‘pause’ in injecting more liquidity into the economy, saying it would ‘act as needed’ to promote growth and curb inflation.