The Bank of England has released its credit conditions survey for the second quarter of the year and found that the availability of mortgages is likely to continue its decline during the next three months, while the number of people who default on mortgages is expected to rise. The Bank said a big factor in the tightening up was that lenders expect house prices to experience further falls. Chancellor Alistair Darling said yesterday that there was little the government could do to assist on mortgages while the wholesale credit markets remained frozen.
Meanwhile the European Central Bank has defied political pressure and announced it would raise interest rates to their highest level in almost seven years, with a quarter point increase. Fearful of inflation, the ECB president increased interest rates to 4.25 per cent in the first increase in more than a year.
MPs have voted to keep their second home allowance, worth up to £24,000, but decided not to give themselves an above-inflation pay rise. A review by a Commons committee had recommended that the ‘additional costs allowance’ for maintaining a second home should be replaced. However MPs will now only be subject to an internal audit, London MPs will receive a new weighting allowance of £7,500, and all MPs will get a 2.25 per cent pay rise. The Tories accused the government of sabotaging attempts to reform the system after 146 of the 172 MPs who voted to keep the allowances were Labour MPs, including 33 ministers.
Following Wednesday’s announcement that Taylor Wimpey will cut 900 jobs, it’s been revealed that housebuilder Barratt Developments will axe up to 1,000 people, or almost 15 per cent of its workforce. In the last of their figures available, the number of completions had fallen 5 per cent, while reservations were down 33 per cent, compared with a year earlier.
Council tax rebels are to have their bank accounts frozen instead of being imprisoned under new plans unveiled by Local Government minister John Healey. Ministers want to give town halls the power to refer defaulters to the civil courts rather than the magistrates’ courts, where their bank accounts could be seized. Last year more than £600 million of council tax remained unpaid.
And the bad news continues. UK households are 15 per cent worse off than five years ago as rising food and oil prices put the squeeze on household incomes. The report shows that after tax contributions and monthly household bills, the average family has just under 20 per cent left from its gross income, compared with 28 per cent in 2003. And average monthly mortgage repayments (based on a 25-year repayment mortgage at a standard variable rate) is just under £735, which is 78 per cent higher than 2003/4 – driven by higher interest rates and a ‘significant’ increase in the size of a mortgage.
But if it all gets too much, a Belgian architect may have the answer. He has designed a floating city in the shape of a lilypad that could be used as a permanent refuge for climate change migrants. The ‘Lilypad City’ could float around the world as an independent and self-sustainable home to 50,000 inhabitants. However he has yet to estimate building costs or how much it would cost to live on it.