Lunchtime news Monday 2 June 2023

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.