ROOF Blog

The number of mortgages approved for house purchase fell for the third month in a row during February as the housing market continued to show signs of slowing down, figures revealed today. A total of 47,094 loans were approved for people buying a home during the month, 21% down on the recent peak reached in November last year, according to the Bank of England. However, the Bank’s figures also showed a rise in unsecured lending during the month, with consumers taking on more debt through credit cards, personal loans and other forms of credit than at any time for 15 months.

Councils will be allowed to keep their rents and the proceeds from the sale of homes under an overhaul of local authority financing that reverses reforms from the Thatcher era. Along with borrowing freedoms that were recently introduced, this could lead to up to 10,000 extra council houses being built every year and mean 10 per cent more money a year for maintaining and managing Britain’s 1.8m remaining council homes, which are occupied by 4m people, the government said yesterday. Housing minister John Healey said the move amounted to a ‘once in a generation chance of change’ that should be welcomed by councils. Under the plans, the ‘housing revenue account’ system will be dismantled in 177 local authority areas. This would end the current system, whereby income from council housing goes into a central pot, not all of which is returned to local authorities.

The end of stamp duty relief at the start of the year has helped cause a substantial dip in mortgage lending during January, with just £8.02 billion lent during the month, the lowest level since March 2001. This compares with an average monthly amount of about £18 billion during 2007. The data, released by the British Bankers’ association, are the latest figures to suggest the economy will endure a slow recovery, after signs of optimism at the end of last year. A leading member of the Bank of England’s Monetary Policy Committee warned today that the housing market could be ‘weak’ during 2010.

Gross mortgage lending in January fell to the lowest level in 10 years as buyers were deterred by the end of the stamp duty holiday, figures showed this week – but experts have warned that lending could decline further as banks lose government funding support. According to the Council of Mortgage Lenders (CML), gross mortgages totalled just £9.1bn in January, down 32 per cent from the £13.4bn in December. This is the lowest monthly total since February 2000, when gross lending was £7.9bn. While a seasonal fall is usual between December and January, the CML said the drop was ‘larger than average’ due to higher purchase activity in December, as borrowers rushed to take advantage of the stamp duty holiday on properties valued less than £175,000.

Both the CML and the Bank of England agreed that mortgage lending edged up again in the last months of the year, against the usual seasonal downturn. The CML reported that gross mortgage lending reached an estimated £13.7bn in December, up 14 per cent on November. A rush of sales before the end of the stamp duty holiday and the prospective hike in VAT accounted for much of the improvement.

The Governor of the Bank of England, Mervyn King has called for big banks to be broken up, in a speech to business leaders in Edinburgh. He suggested that ministers’ refusal to hive off the ‘casino’ investment arms from High Street banks could lead to a crisis ‘even worse than the one we have experienced’. And he warned that rapid increases in the national debt meant Britons would be paying to clear up the mess ‘for a generation’. His intervention came as official figures revealed public borrowing soared to a record £77.3 billion in the first six months of the financial year - the highest half-yearly figure since the Second World War.

Another £70 billion should be shaved off public spending to rebalance the budget, The Confederation of British Industry (CBI) has told the Treasury. The Treasury is planning to borrow £703 billion from 2009/10 to 2013/14, an unprecedented run of deficits that will push the national debt to £1.4 trillion. However, even that stark estimate may be too low because the economy will not rebound as fast as ministers hope, business leaders said. ‘With a lacklustre recovery in prospect and a structural loss in output, the CBI estimates that borrowing could even exceed this projection by £50 billion,’ the group said in a submission to the Treasury. In addition, another £70 billion will be needed over the following two years to balance the budget by 2015-16, the CBI said. The CBI has drawn up a detailed plan to significantly shrink the public sector, cutting costs and handing over many tasks to private companies. The group also wants public sector staff pay and benefits to be curbed.