Lunchtime news Wednesday 14 May 2023

Housing minister Caroline Flint accidentally revealed that experts believe house prices could fall by ‘at best’ 5 to 10 per cent, and they also expressed concern over meeting the target of three million new houses. Photographed carrying notes into a Cabinet meeting at No10 yesterday, Ms Flint has shrugged off the incident and insisted that the notes reflected expert analysis, rather than government forecasts. Shadow housing minister Grant Shapps said it showed that ministers were painting one housing market scenario in public and the exact opposite ‘behind closed doors’.

After Redrow yesterday, today Barratt Developments has reported falling sales and rising cancellation rates as conditions in the market deteriorate ‘significantly’. Barratt said that the ‘unprecedented’ drop in mortgages and lower consumer confidence had brought reservation rates down by a third against the same period last year, while cancellation rates have been running at about 25 per cent since the beginning of the year, and currently rising.

Hopes of interest rate cuts are in doubt as inflation rises to 3 per cent. The soaring costs of food and fuel has triggered the largest jump in inflation for six years, and analysts are now saying that rates may need to be kept on hold (at 5 per cent) for the rest of the year.

Meanwhile, Bradford & Bingley is raising £300 million in an emergency rights issue this morning to shore up its balance sheet on mortgage accounts. It is only a few weeks since B&B denied a report that it was contemplating a rights issue. In answer to why B&B did not announce the rights issue with its interim statement on 22 April, the chief executive said that a ‘month makes a big difference’ and it was a more stable environment now to make the announcement. Alliance & Leicester is set to pull £14 billion of capacity from the mortgage markets after its balance sheet fell £1.5 billion in the first four months of the year, reducing an already under-funded sector, and heaping more misery on first-time buyers.

And finally, falling house prices are making it harder for couples to divorce. Where the family home is a couple’s main asset it will usually have to be sold as part of the settlement, but with mortgages becoming hard to come by and many buyers holding off in the hope that prices will fall, properties are harder to sell and some couples are putting off divorce proceedings.