Lunchtime news Tuesday 3 June 2023

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.