ROOF Blog archive

The number of new mortgages approved for house purchases in Britain has fallen for another month. The figures from the Bank of England shows that 42,000 homes were approved in May, a 28 per cent fall from the previous month, and down 64 per cent from a year ago. These are the lowest figures since the Bank began reporting them in 1993.

Meanwhile the Land Registry released its house price figures for May, which showed that prices in England and Wales were unchanged in May and up 1.8 per cent over the year, although sales volumes during March were half the number of a year ago. The figures are made up of completed property sales from all lenders.

And Hometrack has also released its house price index for May in England and Wales. Its figures reveal a one per cent drop in June, which was twice as fast as in May. Prices have dropped 2.5 per cent since the beginning of 2008, (wiping off around £4,250 from the value of the average home) and are down 3.2 per cent on a year ago. The length of time taken to sell a home has also increased from six weeks to 10.3 weeks.

And the bad news continues as consumer confidence has taken a battering by the credit crisis. A monthly poll shows that householders’ confidence about future economic prospects has sunk to its lowest level since 1982 and confidence in current economic conditions are at their lowest since 1992, the end of the last recession.

Building societies are planning a mass defection from the Council of Mortgage Lenders umbrella after concerns that their voices are not being heard over those of the banks. Building societies, which account for 25 per cent of Britain’s home loans, are preparing to shift their mortgage representation to the Building Societies Association.

The campaign against the 15 sites earmarked for eco-towns continues today as protestors gather outside parliament for Caroline Flint’s expected announcement of the second round of public consultation, which is expected to include a series of roadshows around the shortlisted sites. Campaigners are calling on ministers to go back to the drawing board, saying eco-towns are the ‘least sustainable way of developing housing’ and other plans should be examined. According to the Times, some ministers are having reservations as their own advisers have said most of the proposed locations do not meet environmental standards, and along with the crisis in the housebuilding industry, there are fears that the market is not strong enough for the number of new homes. Ministers are saying it is quality not the number of new developments that is most important.

But Sunday Telegraph believes that the government will raise millions of pounds from eco-towns as six out of the 15 shortlisted sites are on property owned by the Ministry of Defence. The newspaper reported that the Treasury stands to make around £275 million through land sales, and the ‘clawback’ provision which gives the MoD between 30 and 50 per cent of an increase in the land’s value.

However despite the often high-profile and widespread opposition, a recent poll found supporters of eco-towns outnumber opponents by five to one.

And finally, squatters have taken over the house that Ratty’s home in Wind in the Willows was based on. Left to the National Trust in the 1930s the house has stood empty of tenants since 2006. In April the squatters moved in saying they have taken ’direct action in protest at the National Trust’s neglect’.

The Office of Fair Trading has concluded its report into customer satisfaction and the success of regulations and competition in the housebuilding industry. Seven in 10 buyers of newly-built homes found faults with their property, although most of the problems were only minor issues and did not cost the buyer anything to fix. However, 32 per cent of buyers said that they could not move in on the date they were originally told, and only one in ten were paid compensation. Landbanking, where firms held on to land to boost profit was also looked at, but the report said that most of it reflected a need to have land at different stages of development rather than a ‘desire to be anti-competitive’.

The governor of the Bank of England and four of his colleagues from the Monetary Policy Committee were questioned by MPs yesterday, and revealed that the majority of the nine-person panel had considered voting to raise base interest rates this month. As inflation rose to 3.3 per cent in May, Mervyn King tried to calm fears that further rises would be necessary saying that rate cuts could plunge the economy into recession and that there was no point raising them to ‘avoid putting the stamp on the envelope’ (referring to the letter he must write to the government explaining why inflation was over the government’s 2 per cent target).

Meanwhile all the talk on the credit crunch has put the kibosh on savings, as the number of households putting money away for their future has plunged to its lowest rate since 1959 according to figures from the Office for National Statistics. The savings ratio has more than halved in the first three months of the year to 1.1 per cent, while real disposable incomes fell by 1 per cent in the first quarter of the year, the sharpest fall in nine years. The figures are a cause for concern as a fall in the savings ratio is usually a sign that the economy is about to suffer a slowdown.

HSBC’s ’rate-matcher’ deal, offering borrowers a mortgage at the same rate they were paying before their deal ended, is hitting borrowers with arrangement fees of up to £9,999. The offer was originally marketed as a way of helping homeowners who would otherwise have faced monthly increases of hundreds of pounds in their repayments when their fixed deals ran out. However, the arrangement fees have been increasing at a rapid rate. Borrowers who took out a loan of up to £500,000 face paying the £10,000 fee; but even those on a £120,000 deal fixed for two years would have seen their fee triple to £3,299. Halifax, Britain’s largest mortgage lender has also been accused of trying to sneak in new fees of £245 for a so-called ‘mortgage account fee’. But don’t be confused, this is not a mortgage arrangement fee according to a spokesperson for the company, rather its ‘a replacement for its mortgage exit arrangement charge’.

But according to new figures from Abbey people are increasingly better off buying than renting. It says that it is now more than £10,000 cheaper to buy a house than rent one in many parts of the country, compared to six months ago when it was £5,800 cheaper to buy than rent, over 25 years. The greatest savings depend on where you live – those in the South East make the some of the biggest savings and will leave you more than £50,000 better off over 25 years having bought than rented.

There has been a doubling in the number of unsold homes over the past 12 months according to Rightmove – with 15 homes on the market for every buyer. Rightmove thinks this puts buyers in the driving seat and they expect that sellers will be increasingly forced to drop their asking prices, with prices already dropping 1.2 per cent in the five weeks to 14 June. The belief that prices will drop has been reinforced by findings from a survey from the Building Societies Association showing that around 74 per cent of respondents thought that prices would fall next year, with most forecasting an average decrease of 7.1 per cent.

Gordon Brown is expected to unveil plans today to increase the amount of energy from renewable sources to 15 per cent by 2020 and investing £100 billion in the industry, in what has been billed as the biggest shakeup in Britain’s power generation since the industrial revolution. Under the plans, households could be forced to improve the insulation and energy efficiency of their properties when renovating; but would be eligible for grants or low-cost loans to help fit solar panels or wind turbines to properties and get cheaper fuel bills if their neighbourhood becomes a mini ‘turbine city’. It could create more than 150,000 jobs and significantly reduce gas emissions and reduce dependency on gas and electricity.

In the other corner, opponents of eco-towns are lining up to slate the government’s latest plans to tackle climate change. A report out by the Eco-Town Challenge Panel said some plans resembled traditional housing estates with green elements just ‘added on’, while other towns risked becoming ‘commuterville’. The Campaign to Protect Rural England (CPRE) added that the more they were looking at the plans for the towns, the ‘more depressed we are getting’. Meanwhile the Local Government Association wants eco-towns to be built in urban areas, not the countryside, to stop them from becoming ‘dormitory towns’ and creating ‘eco-slums’ without proper planning.

Meanwhile, the National Housing and Planning Advice Unit (NHPAU), the body charged with realising the government’s pledge to build three million new homes by 2020, has told the government not to focus on the current short-term downturn in the property market but to continue looking at the long-term. It argues that at least 2.96 million new homes need to be built, with as many as 3.48 million required to add to current housing stock. The NHPAU says that the southern regions require the greatest number of new homes with the North East needing the fewest.

The big banks are expanding their share of the mortgage market in the wake of diminishing choice for consumers. Normally the big lenders have around 60 per cent of the market, but currently the big banks are providing between 90 and 95 per cent of all new home loans. Barclays for example now claims it has a 28 per cent of the market share in the first quarter of 2008 compared to only 2 per cent a year ago. Meanwhile three more major lenders have increased the cost of their fixed rate deals – Bradford & Bingley, First Direct and the Cooperative Bank, a day after the average cost of a two-year mortgage broke through the seven per cent barrier.

Debt charities are warning of the rise in ’payday loans’, where consumers are turning to short-term loans charging interest of more than 1,000 per cent, to tide them over until they get paid. The number of such loans has more than doubled in the past ten months as soaring fuel and food prices eat into people’s purchasing power.

In Scotland the government has unveiled measures aimed at helping homeowners at risk of repossession, with a £25 million Homeowners’ Support Fund and the expansion of the £250 million shared equity scheme, along with ending the right to buy of new social housing. The government reiterated its commitment to building 35,000 homes a year by the middle of the next decade. However the SNP has scrapped the promise to give all first-time buyers a £2,000 grant, with many believing it was too expensive.

Mortgage lending for house purchases has fallen to its lowest level on record in May according to figures out by the British Bankers Association (BBA). The number of mortgage approvals fell to just 28,000 last month, a fall of 20 per cent in one month and down 56 per cent in year-on-year figures. BBA’s figures account for about two-thirds of the total UK mortgage market and mortgage approval numbers are seen as a good indicator of sales in the next few months. The BBA warned that the market would stay subdued.

Meanwhile, Chancellor Alistair Darling has warned banks to stop ‘ripping customers off’ over mortgage arrangement fees. The chancellor said he was aware of many banks upping their fees during the past 18 months, some by as much as 66 per cent, with many lenders also starting to charge set-up fees of up to 2 per cent. He is currently in discussion with the Financial Services Authority to decide a ‘fair’ fee for arrangement costs, although he has rejected the idea of imposing a cap. The average fee for a fixed-rate deal now stands at £860.

Loans are at their most expensive since February 1997 as the interest rate on the average two-year fixed rate mortgage has risen above 7 per cent according to figures by Moneyfacts, the financial information service. This figure is one percentage point higher than what was available a year ago, adding £77 to the monthly cost for someone taking out a £150,000 25-year mortgage. Moneyfacts say that the rising costs of inter-bank borrowing is being passed directly on to the customers.

An independent report into last summer’s flooding has said that flood defence must be taken more seriously. The review said that building regulations must be stricter in flood-prone areas and planning better – including using better building materials that would be damp resistant; providing a map of all drainage ditches and streams in a local authority area; and expecting utility companies to protect key infrastructure sites. These measures are not deemed expensive and could be achieved within the government’s existing £800 million flood defence budget. Nearly 45,000 homes were affected in the flooding and around 5,000 people are still living in temporary accommodation.

First-time buyers who have been pushed out of the housing market as the cost of borrowing increases, are also being squeezed by rapidly rising rents – up by a third in some areas, according to Paragon the buy-to-let mortgage lender. Tenants in the South West have been hit with paying almost 30 per cent more from a year ago, and in the North and Yorkshire, with increases of up to 25 per cent, with the sharpest rises in houses. The Association of Residential Lettings Agents confirms these figures saying that almost 40 per cent of agents now had more customers than properties to house them in.

And finally, the country’s oldest council house is now available for rent. The house, built in 1621, has all you’ll need – a bathroom, kitchen and bedroom, and could be all yours for just £75 a week. The catch – it’s open to the public and you’ll have to conduct tours of the property… But at least they will be quick – its only 20ft wide.

The housebuilding sector suffered another blow yesterday when Taylor Wimpey debt was downgraded to junk status. The downgrade, by credit-rating agency Fitch Ratings, comes amid an unprecedented decline in the housing market, with home sales plummeting, mortgage lending squeezed and new housing starts at their lowest in more than half a century. Fitch raised concerns that the company may be in danger of breaching its banking covenants. Most building firms agree to keep their debt at a certain percentage of their asset values, and with property prices on the slide some of the biggest housebuilders have been scrambling to refinance. Taylor Wimpey, Britain’s biggest housebuilder in terms of volume, has about £1.9 billion of debt. The Fitch downgrade potentially makes it more difficult and more expensive for the company to issue further debt. Shares in Taylor Wimpey, down 63 per cent so far this year, fell only marginally yesterday, reflecting the fact that most investors had anticipated the downgrade. The company, formed a year ago through the merger of Taylor Woodrow and Wimpey, has announced plans to close 13 offices and cut 600 jobs. It has mothballed new developments and curbed land acquisition.

Are we heading for a recession as bad as the early 1990s? There are plenty of doomsayers, but for now they are outnumbered by optimistic forecasters. Many admit it looks as though we are back to the early 1990s in terms of the housing market. After the Lawson boom of the late 1980s, house prices were either falling or broadly stable from 1989 to 1996. The price of homes relative to incomes was actually slightly higher last year than it was in 1989, so if the experiences of the 1990s were to be repeated we would have to wait to about 2014 before prices are back to the level of last autumn.

The housing market is likely to slow down even further as borrowers will soon be unable to find mortgage rates under 6 per cent, according to online mortgage adviser mform.co.uk. Even homeowners with a lot of equity and spotless borrowing records are failing to find fixed-rate loans within 1 per cent of the Bank of England base rate, currently 5 per cent. Mortgages which have managed to remain below this level are likely to charge huge arrangement fees. In some cases, that would be 3 per cent of the total value of the loan: on a typical £150,000 mortgage, £4,500. Francis Ghiloni, from mform, said: ‘Borrowers are still looking for the certainty delivered by fixed rates but we’d urge people to consider variable products such as discount rates.’

The government is on inflation alert amid fears that dearer petrol and food will herald the start of a year of bad news on the cost of living and limit the Bank of England’s ability to cut interest rates. With the latest official inflation data due out this morning, the City is braced for an annual increase of more than 3 per cent. City analysts said the inflation rise would come at an unwelcome time for the Bank, with evidence house prices are falling and unemployment has started to rise. Inflation is expected to peak at 4 per cent in the autumn but to remain at or above 3 per cent until 2009. Interest rates in the City’s money markets have increased sharply over the past month in anticipation that the Bank would push up the bank rate from 5 per cent. The Nationwide, Britain’s second biggest lender, became the latest building society to raise the price of home loans yesterday – hiking the cost of its mortgages by as much as half a percentage point.

And more gloom is expected as the construction industry is hit by a severe downturn and housing starts fall to their lowest level since the end of the Second World War. The Construction Products Association, whose forecasts are watched by the Government, said that the Prime Minister’s own housing targets for 240,000 new homes a year in England by 2016 were now at risk. In its summer forecast, the CPA said that UK housing starts – where construction physically starts on site – were likely to be around 147,000 this year, the lowest annual number since 1945, and 27pc lower than 2007.Michael Ankers, chief executive of the CPA, said: ‘The impact on the new build housing market has been more severe than any of us anticipated. To be starting fewer new homes than at any time over the last 60 years illustrates the scale of the problem we now face.’ He called on the Government to respond urgently to the housing ‘crisis’ by helping first-time buyers, investigating ways in which the recent interest rate cuts could be passed on to mortgage payers, and by increasing their social housing ownership scheme.

Meanwhile, the price of an average fixed-rate mortgage deal has hit its highest level in 10 years as lenders pass on rapidly rising borrowing costs. The average new two-year fixed rate reached 6.75 per cent yesterday, according to data from Moneyfacts.co.uk, the price comparison website. Longer-term fixed deals have also become considerably more expensive, with the average five-year rate rising to 6.72 per cent. By comparison, a year ago fixed-rate mortgages were available with interest rates of about 5.5 per cent. A number of lenders have made sharp increases to their fixed mortgage rates in recent days as concerns over rising inflation have pushed up the cost of borrowing through the money markets. Lloyds increased its standard range of deals by 0.3 of a point, while Nationwide increased some rates by up to 0.5 of a point. Woolwich meanwhile withdrew its entire range of fixed-rate products. Abbey, Royal Bank of Scotland and First Direct have also recently raised rates and other lenders are expected to follow suit in coming weeks.

High-earning families could be kicked out of their council homes in an effort to help needy people stuck on waiting lists. And tenants who own a second property also face eviction under plans being considered by ministers. The move comes after a report found 261,000 households benefit from cheap council housing despite having an income of more than £2,000 a month after tax. This includes 38,000 families earning more than £50,000 a year – way above the national average of £27,000. But four million people with genuine need for subsidised housing are languishing on waiting lists. The study by the New Local Government Network said householders should be made to do an annual tenancy review. Network chief Chris Leslie said: ‘Shouldn’t the taxpayer be funding social housing for those that need most help, rather than subsidising the richest tenants who could easily afford to live in private accommodation? It isn’t fair if homeless families and those in most need can’t get a council house because they are blocked by the wealthiest tenants.

House prices are set to fall further for at least the next 18 months and will not recover for at least another four years, leading economists say today. Nearly two thirds of members of the Society of Business Economists said that house prices would not rise above last year’s peak until at least 2012. Nearly 15 per cent said that prices may not rise to last year’s levels until 2015. Average prices have fallen by 7.7 per cent since September last year, according to figures from the Halifax bank. Further falls would help prospective first-time buyers, who are currently priced out of the market. ‘It doesn’t look like we’re going to see a fall and a quick bounce back,’ Bronwyn Curtis, the chairman of the society, said.

Leading housebuilders have blasted the Government for failing to help out the ailing sector amid warnings that just 100,000 new homes will be built this year against the Prime Minister’s target of 240,000. Senior figures described the Government as ‘dithering’ and warned of mass redundancies across the sector without state intervention. The criticism comes as shareholders in McCarthy & Stone appointed NM Rothschild to look at strategic options for the retirement homes company, thought to include the injection of fresh capital into the business. Housebuilders including Barratt Developments and Taylor Wimpey saw their share prices hit new lows last week amid fears that they will be forced to raise new capital via rights issues. Barratt is in talks with lending banks to renegotiate its banking covenants.

Struggling homeowners in Wales are to be given a financial lifeline. An extra £5 million has been transferred to the Welsh Assembly’s mortgage rescue scheme in a bid to stop homeowners who face repossession from being made homeless.

The target of ending homelessness by 2012 in Scotland might not be achieved across all of Scotland, MSPs are being warned. Gavin Corbett, policy manager at Shelter Scotland is to speak on the issue when he gives evidence to MSPs on Holyrood’s local government and communities committee.

Still in Scotland, the results of the 2007 Scottish household survey, published today, paint a rosy picture with 93 per cent of adults rating their neighbourhood as a very or fairly good place to live.

Inequality in Britain is equal to its highest level since figures were first available in 1961, according to new research from the Institute for Fiscal Studies (IFS). The figures show a widening gap between the richest and poorest families and a second annual 100,000 jump in the number of children living below the government’s poverty threshold. The IFS said that, despite the billions of pounds spent on tax credits, Labour had yet to meet its 2005 target of reducing child poverty by a quarter.

Council of Mortgage Lenders statistics reveal that 23,000 people who took out 100 per cent mortgages in the year to March 31 could see their properties go into negative equity as house prices continue to fall.

With nine out of 10 estate agents reporting falling prices, the Royal Institution of Chartered Surveyors (RICS) says the downturn in the property market is likely to spill over into weaker high street spending and job losses for construction workers. New RICS stats, released today, show that the number of transactions per estate agent is the lowest since 1978 and a drop of almost a third on a year ago.

Newspaper commentators take the results as further evidence that the downturn in the housing market could turn into a crash, while the Mail asks if we’re heading for a re-run of the Winter of Discontent in 1979.

More doom and gloom, this time courtesy of the Office of National Statistics. According to latest data from the office, the UK is facing the most extreme price rises since the early Eighties, following a 27.9 per cent jump in the cost of basic materials – from metal and oil to energy and basic food ingredients – on last year’s figures.

A large majority of people believe that tenants should risk losing their home when they refuse help to find work, an Ipsos Mori poll for Inside Housing revealed. Almost three-quarters of the respondants backed the idea floated by housing minister Caroline Flint earlier this year.

The decent homes initiative is leaving hundreds of people who bought former council flats in England facing homelessness. Many homeowners are receiving bills for thousands of pounds for repairs they say they cannot afford. One homeowner, who bought his flat in the London borough of Westminster in 2003 for about £40,000, has received a bill for £58,000 – about three times his annual household income.

One in three British children lives in relative poverty, says a report from the four children’s commissioners in the UK. The joint report by Sir Al Aynsley-Green, children’s commissioner for England, and his counterparts Kathleen Marshall, Scotland, Keith Towler, Wales, and Patricia Lewsley, Northern Ireland, will be presented to the United Nations Committee on the Rights of the Child this week.

House prices will fall by nearly 50 per cent by 2011 then slowly climb back to current market values over a period of about six years, according to an index of residential property futures. The index, based on the Halifax monthly house price index, is designed for banks, pension funds, insurance companies and housebuilders to trade on the future values of property.

More and more tenants are being evicted due to their landlords’ financial difficulties, according to figures from Britain’s biggest buy-to-let lender, Bradford and Bingley. The stats revealed that the number of investor landlord mortgages that are at least three months in arrears jumped 52 per cent from 1,995 at the end of December to 3,037 at the end of April.

The slowdown in the housing market has hit a brick wall. The chief executive of Wienerberger, the world’s largest brick maker, said that plants in Surrey and Devon would be shut down in the face of a very weak British housing market.

Although interest rates were kept on hold yesterday by the Bank of England, Bradford & Bingley announced it was the latest lender to raise its mortgage rates by between 0.05 and 0.55 per cent on new mortgages, effective today. The bank blamed the increased cost of raising funds in the financial markets.

At the same time, Lloyds TSB has reached a deal with Northern Rock to encourage mortgage customers coming to the end of their fixed rate deals to switch their mortgages over from Northern Rock to Lloyds. Selected customers will have the application fee waived and Lloyds will pay a commission to Northern Rock for each customer who switches. Since being nationalised, Northern Rock has tried to reduce the size of its loan book.

And according to figures by the Guardian newspaper, repossessions at Northern Rock are running at twice the rate now than before nationalisation in February. More than 400 homes were repossessed in May, compared to less than 118 in December and 237 in January.

The Wildlife Trust has come out against eco-towns, in the latest blow to government plans to build 10 sites around the country by 2020. The Berkshire, Buckinghamshire and Oxford order of the Trust has launched a campaign against a 15,000-house site, which a spokesperson said indicated ‘high density housing, a tram line and a railway…’ The Trust is objecting to what is thinks is inappropriate and poorly thought out development.

Meanwhile, a conference was held yesterday to study how the UK government will be able to make all new homes zero carbon by 2016 as planned, while optimising the existing housing stock. The Futures Homes event is based around three key themes of design, build and planning.

A new landlords’ insurance policy is being marketed that ends the need for tenants to provide a deposit. The No Deposit policy provides protection against loss of damage to the property caused by the tenant, while avoiding extra cost for the tenant at a time of spiralling costs. The scheme also provides for a mediation service where a ‘mutually agreeable solution’ to disputes can be issued.

The latest Halifax house price index, out today, continues to show falling prices. Prices in May dropped 2.4 per cent, while the year on year figure is down 3.8 per cent. The Halifax said it was the largest annual fall in prices since 1993, and the average price for a home in the UK is now £184,111.

Meanwhile, the Bank of England’s monetary policy committee has kept interest rates at 5 per cent. Despite signs that the UK economy is slowing, house prices are dropping and consumer confidence is down, the Bank is concerned about inflation and was expected to hold interest rates at the previous month’s level. The Home Builders Federation had called for a 0.5 per cent reduction in rates, saying a cut was ‘imperative’ to ‘alleviate the severe housing market slowdown, driven primarily by halving in available mortgages’.

The Organisation for Economic Cooperation and Development (OECD) has warned of a global economic slowdown and predicted that economic growth in the UK will drop to 1.8 per cent this year and to 1.4 per cent in 2009. The global credit crisis, slowing property market, and high cost of commodities such as oil have all hurt the economy. Despite the problems, the OECD thinks that the worst phase of the crisis may be over after central banks pumped several billions of dollars into the banking system.

The Council of Mortgage Lenders (CML) is to publish a manual for MPs to advise them on how to deal with constituents in danger of losing their home to repossession. It also announced that it would introduce a course in ‘arrears and possessions’ that will be available for mortgage lending staff who work in call centres or collections. Lib-Dem Treasury spokesperson Vince Cable said that he was concerned about the plan as MPs have no experience as financial advisers and called them a ‘poor substitute for having independent advice’.

Consumers have been overcharged by £1.4 billion a year due to a lack of competition in the payment protection insurance (PPI) market according to the Competition Commission. The insurance which protects credit repayments if the holder is unable to work or loses their job was failing to work competitively said the commission. It warned that it was considering banning the cover from being sold alongside credit arrangements, while temporarily introducing a price cap. It called for consumers to be able to switch between PPI providers more easily.

A report from Hometrack says that that falling house prices will help young homebuyers purchase a home for the first time, but the current mortgage shortage will be an obstacle for many. The report found that 28 per cent of young people in work are unable to buy even the cheapest local property, with the situation even worse in London and the South West. The cost of paying back a home loan rose to 34.5 per cent of average incomes for first-time buyers last year, so a 10 per cent fall in prices would allow a fifth of those currently priced out of the market to buy a two- or three-bedroom property.

Struggling? Then move to Scotland – the Scottish mortgage market is in the best shape in the UK according to the Council for Mortgage Lenders - as property prices and loans tend to be cheaper there than the rest of the country. While property prices have increased every year in Scotland since 1974 and for the past four years seen percentages rise that have outstripped the rest of the UK, generally Scots have borrowed less (three times the average salary) and prices remain 25 per cent lower than the rest of the UK.

An increasing number of homeowners are taking a mortgage holiday as pressure on household finances intensifies. Most of the major lenders have reported a rise in borrowers taking or planning to take a mortgage break, skipping payments for up to a year. A spokesperson for Council for Mortgage Lenders said that any lender ‘would make an assumption that an enquiry about a payment holiday is a likely indicator of financial trouble’.

The government is under fire (again) after it was accused of standing to make ‘profits’ of more than £700 million from two million council house tenants in England over the coming three years, with no guarantee that the surplus will be put back into housing. Council rents are collected by councils and the Treasury ‘siphons’ off up to a quarter for ‘redistribution’ or returned under a complex system that everyone agrees is past its use-by date. Councils met recently to pressure the government to reform the system which sees 162 councils in the UK making a loss after redistribution and only 52 gaining any extra money.

Meanwhile thousands of vulnerable people are going without food or heating to pay for the cost of homecare services provided by local authorities. Charges for assistance with dressing, washing and eating have more than trebled since 1997 as councils try to limit the growth in the social services budget. In some areas services were free, but in others the cost could be up to £17.30 an hour, with only the poorest households exempt. Critics have said that government funding has not kept pace with the demands of an ageing population and the social care system is ‘creaking at the seams’.

And finally squatters have been given advice in a council recommended handbook, on how to break into empty properties and set up home with paying rent. The booklet, distributed by the Advisory Service for Squatters, gives tips on removing locks to enter, what to do if caught and provides general legal advice.

Nationwide building society has joined Abbey National in raising the price of its fixed-price mortgages. Increasing two- and three-year fixed rate deals by 0.3 per cent, while demanding a minimum of at least a 10 per cent deposit, Nationwide blamed the rising cost of inter-bank lending for the rises. However, Halifax announced that it would cut an average of 0.3 per cent from its fixed rate deals.

Meanwhile, fall out from yesterday’s announcement from Bradford & Bingley that it was selling a 23 per cent stake to TPG, and asking existing stakeholders to provide up to £258 million of new capital, continued. Its shares fell after recording an £8 million pre-tax loss for the first third of 2008 with B&B blaming problems on buy-to-let mortgages that ‘people were struggling to repay’. Chancellor Alistair Darling stressed that depositors’ money was safe and applauded their actions saying they are doing exactly what the Bank of England was encouraging them to do – ‘restructuring and strengthening their position to go forward’.

Yesterday however B&B, the UK’s largest buy-to-let lender representing 20 per cent of the market, also revealed that it had faced a 52 per cent jump in arrears of three or more months, on its mortgages during the first four months of this year. Those with arrears of three plus months now make up more than 1.5 per cent of B&B’s total buy-to-let customer base.

But it’s not the buy-to-let sector that may topple the housing market, according to research by Capital Economics which suggest that the second home market will be the culprit. As prices continue to drop, up to a quarter of second homeowners are expected to try and sell up immediately, but facing a lack of buyers, the increase of the number of homes on the market will cause a further drop in prices. Commentators believe that the sell 0ff will be exacerbated by the recent changes to capital gains tax which has reduced the tax rate to 18 per cent from 24 per cent.

And if you think staying put and renovating will solve all your problems, think again. The cost of building work has risen 20 per cent during the past two years due to the lack of skilled tradesmen and the rising cost of building materials. According to the Royal Institute of Chartered Surveyors the number of builders and decorators leaving the UK to return to eastern and central Europe has led to an increase in competition for qualified workers, leading to a rise on average of 26 per cent for roofers, 22 per cent for plumbers and 17 per cent for painters; while the cost of raw materials has increased due to high old prices and strong demand from other countries.

If you needed further confirmation of the continuing slowdown in the house market it has come from the Land Registry. On Friday, it reported that property prices fell by 0.2 per cent during April, taking the annual rate of house price inflation down from 3.6 to 2.7 per cent. It was the eighth month in a row showing a drop in prices. There are however big variations in regions – with price falls in East Midlands, Wales and the West Midlands, but prices nearly 7 per cent higher in London than a year ago.

The number of mortgage approvals also fell to a record low for the second successive month, according to figures from the Bank of England. Just 58,000 loans were approved in April, down from 64,000 the month earlier, and much worse than expected. This brought the year on year figure down by half, but experts do not expect the Bank to lower interest rates.

And yesterday, leading bank Citigroup has warned that a quarter of a million homeowners have slipped into negative equity since the start of 2008, and more than a million could by the end of next year as the housing crisis deepens. The group’s chief economist suggests that house prices could fall by as much as 15 per cent or more by the end of 2009, which would take the number of households into negative equity over the million mark – or one in 12 who have a mortgage would be affected.

A Panorama report on BBC tonight suggests that Britons have been buying into unrealistic property dreams. Some 79 per cent of those asked asked thought the UK had been unrealistic regarding housing affordability. Whereas 37 per cent said they would still stretch themselves to get on the property ladder, 59 per cent felt that the credit crunch was making people more realistic about what they could afford and 78 per cent thought that house prices would either stay the same or decrease.

The news comes as mortgage payments will rise to their highest level in more than a decade as the gloomy economic outlook continues, according to moneyfacts.co.uk The interest rates charged in fixed rate loans are rising to their highest level since 1997, for example a two-year deal will soon have rates of 7.25 per cent, compared to an average rate of 4.34 two years ago.

Bradford & Bingley, the UK’s largest buy-to-let mortgage lender, briefly saw its shares suspended briefly before they plummeted 30 per cent, after it announced a profit warning and confirmed that one of the world’s biggest private equity houses was to take a 23 per cent stake in the company. TPG is injecting £179 million into B&B while existing stakeholders are being asked to provide an additional £258 million of new capital. This weekend B&B chief executive also announced his departure from the organisation with immediate effect, due to a ‘serious cardiovascular condition’.

Meanwhile opposition to the government’s eco-town projects is growing at a rate of 2,000 people a day. Campaigners across the country, including environmental groups, planners and residents, are working together to fight the plans to build 10 eco-towns across England, calling them ‘Gordon’s ghettoes’. They argue that the plans are ill-conceived, environmentally unfriendly and will destroy some of England’s most beautiful areas.

And finally, the credit crunch has given Britain a new class system, ranging from the ‘defiant big spenders’ to ‘worried skinflints’. Of the six new classifications – shrews, ostriches, deniers, alarmists, drifters and opportunists – 43 per cent are said to be shrews – those who are aware of the credit crunch and budget carefully. The next largest group are drifters – those who don’t worry because they don’t pay the bills – either those who are too rich or too poor.