ROOF Blog

The Bank of England figures show the number of new mortgages approved for homebuyers fell in July to just 33,000, down 71 per cent on a year ago. This brings further pressure on the government which is expected to release tomorrow a package of financial measures to get the housing market moving again. The latest organisation to claim that governmentefforts are lacking, the Royal Institution of Chartered Surveyors, has come up with its own reforms, after its latest research found that housing sales are at a 30-year low. Recommendations include: allowing the Bank of England to guarantee the issue of new mortgage-backed securities; establishing a tax-free savings scheme to allow first-time buyers to save for a deposit more easily; a short-term holiday on stamp duty, followed by a new lower rate; reduced VAT on repair and maintenance costs; changes to the home information packs; and a mortgage rescue scheme that will allow people to remain in their properties.

Hometrack has also released figures showing that sellers are having to cut almost 10 per cent off the asking price in order to secure a sale, but there were signs that falling prices were starting to attract buyers as the number of viewings to achieve a sale fell for the first time in a year. However properties are still taking more than 11 weeks to sell, twice the time taken a year ago.

Meanwhile, a member of the Bank of England’s monetary policy committee, David Blanchflower, has warned that two million people may be out of work by christmas and house prices will have fallen by 30 per cent unless interest rates are cut. He said the Bank should learn from the example of the US Federal Reserve which cut rates to halt a recession.

Housing Minister Caroline Flint has said that the government has created a housing system that encourages people to claim benefits and avoid working in order to get a council home. She said the ‘demeaning and dysfunctional’ rules force people to manipulate the system in a ‘race to the bottom’. She said the government had started looking at some of the issues around allocations and whether the system is fair or not.

If you had bought a house in a university town during the past 5five years however, chances are you won’t be too concerned about the state of the housing market. Prices have soared in 23 towns by an average of at least 50 per cent – but some towns such as Belfast and Dundee had increases of more than 100 per cent. The UK’s ten most expensive university towns are in the south-east of England.

According to the Guardian, some local authorities are advising tenants served with notices to quit, to stay in their property until they are forcibly evicted. The councils say that tenants who give up their accommodation before eviction could be viewed as intentionally homeless and may lose eligibility for a council home.

MPs called for a ‘radical overhaul’ of the outdated benefits system for carers, and urged the government to provide them with extra financial support. People who care for relatives and friends are believed to save the government £87 billion annually, and the Commons work and pensions select committee has recommended income replacement for those who have to work part-time or are unable to work because of their commitments, and compensation for the extra costs incurred by those providing ‘intensive’ caring roles.

The report coincides with the launch of a new service, FirstStop, which aims to be a free one-stop shop for information about care fees, funding, chosing the right home, as well as information about social care provision, benefits and rights. Help the Aged believes that care fees have increased by 51.5 per cent in the past five years to an average of £20,000 a year, and have predicated that they will double in the next 20 years.

Council leaders are asking to be allowed to offer mortgages in an attempt to get the housing market moving. In a letter to the Times they argue that the public sector should be able to help first-time buyers and those unable to secure a home loan, and they are calling for an extra £2 billion from the public works loan board, an agency that allocates funding for capital public sector projects, to provide cheaper mortgages than the private sector.

Meanwhile the latest figures for gross mortgage lending from the Council of Mortgage Lenders show that while lending is up 5 per cent in July, the total is 27 per cent lower than a year ago. So far during 2008 only 29 per cent of mortgage lending has been to housebuyers, the rest has been to people staying in their homes but remortgaging.

And according to government figures the number of new homes being built in England during the past 12 months has dropped 19 per cent. Only 33,400 new properties were started during the three months to the end of June, a 2 per cent increase on the previous quarter. But there was a massive 27 per cent drop in the number of private sector properties built in the past year, compared to a 56 per cent rise in new homes built by registered social landlords, the highest quarterly level for 11 years.

Buyers are demanding discounts of up to 20 per cent according to the Bank of England’s summary for July. The new home market is also facing difficulties as a growing number of buyers are sacrificing deposits rather than go through with a sale.

Thousands of pensioners will lose out on backdated benefits as reforms to housing benefit and council tax benefits come into effect. From 6 October pensioners will only be able to claim backdated benefits for the previous three months rather than the 12 months currently allowed. The changes are part of a plan to allow pensioners to apply for all three benefits in a single phone call. The reforms are estimated to save the government £100 million.

Just days after the Scottish government unveiled a £100 million rescue package for social landlords to buy up unsold homes and land, first minister Alex Salmond has come under fire from one of Scotland’s largest estate agents, for repeatedly claiming that house prices in Scotland are still rising. The package is part of a £1.5 billion affordable housing investment programme and has the support of the Scottish Federation of Housing Associations and Homes for Scotland and is aimed at keeping struggling homeowners in their homes. However, estate agent Slater Hogg & Howison says that the government is using out-of-date figures and that Scotland is following the same trend as England with falling house prices.

More than one million children in Britain live in poverty despite having at least one parent in work, says a new report by the Institute for Public Policy Research (IPPR). The IPPR argues a raft of measures are required to lift the ‘forgotten million’ out of poverty, including: introducing a personal tax credit allowance (PTCA) to boost the financial incentives of getting the second adult in couples to move into work; increasing the value of the working tax credit for couple families, to be paid for by removing entitlement to the child tax credit for higher income families; and boosting the effectiveness of the minimum wage by maintaining its value in line with average earnings.

A select committee of MPs from the department for communities and local government (CLG) has criticised Ruth Kelly and Yvette Cooper over the introduction of home information packs (hips), saying the decision to delay the packs was a failure of nerve following pressure from the media. The committee said the packs were ‘watered down’ and ‘weakened’, and accuse the CLG of poor preparation and failing to deliver. The MPs also blamed a failure to win over stakeholders, like the Royal Institution of Chartered Surveyors (RICS), in their conclusion that the delay to the introduction of hips was ‘taken on a political rather than economic grounds’. The government said it had been a deliberate decision to phase the roll out in order ‘to ensure smooth implementation’.

Informal and private care is funding the financial gap of £25,000 per annum for every disabled person over 65-years-old in Britain, according to a report by the charity, Counsel and Care. Nearly two million disabled people over the age of 65 receive no state-funded care and this figure is expected to rise to 2.6 million by 2022. The evidence the charity collected suggests that there is widespread confusion about the care system caused by lack of funding, an information gap, and a strong perception of unfairness, and they are urging the government to adopt ‘a radical new framework’ for the future of social care.

Overcrowding has been blamed for a 37 per cent increase in suicides among inmates in the ‘failing’ prison system, taking the figure up to 92 suicides in 2007. Penal campaigners and the Conservatives said the rise was ‘the human cost of the prisons’ crisis’, but the Ministry of Justice claimed the overcrowding could help with preventing suicides, as lonely prisoners placed in shared cells had ‘someone to talk to’. The ministry’s analysis of the deaths showed a big rise among vulnerable prisoners such as young offenders, remand prisoners, foreign nationals and lifers, and around one-fifth of the deaths recorded did not result in either a suicide verdict or open verdict at an inquest.

And finally, an office block is to be built in Paris that promises to be one of the world’s greenest commercial buildings. The building, which is expected to house up to 5,000 people, is the first in the world to be both ’energy plus and carbon zero’ and will produce enough of its own electricity to power all the heating, lighting, and air conditioning required, while generating sufficient carbon credits to trade for money. The builder admits it will cost more (25-30 per cent) to construct, which will be passed on to tenants, but looks to the long-term: ‘you’ll have to calculate the value of this over 25 years – we all have to pay the price for living in a better world where there is less pollution’.

The Liberal Democrats have launched a campaign to cut carbon emissions from housing. Climate Change Starts at Home includes a proposal for energy mortgages funding improvements to existing stock and repayable through energy bills.

The Residential Landlords Association is advising its members to pull out of the housing benefit market because benefit will be paid direct to tenants under the local housing allowance.

House prices rose 12.1% in the year to February, according to the DCLG, but prices fell back slightly in February from January.

Key worker housing policy is perverse, says an editorial in the Financial Times. It boosts demand by subsidising rents and mortgages and restricts supply by making housebuilding less profitable. In the short term, increase their wages. In the long term, increase housing supply.

The Observer highlights fears that borrowers struggling with credit cards and personal loans could lose their homes when they take out consolidation loans.

Saturday’s Financial Times highlighted fears that the introduction of home information packs could lead to a hiatus in the housing market as sellers rush on to the market before June.

GET READY to leave the country. Apparently, the government is planning a council tax revaluation. Shockingly, valuers will find out how much a home is really worth and tax it accordingly.

According to the Mail on Sunday yesterday:

‘Ministers have purchased sophisticated ‘Big Brother’ computer systems which calculate the desirability of an area based on the quality of local services and the types of people who live there. The software, which will be used in the forthcoming revaluation of all 21 million homes in England, contains astonishingly detailed data on the number of households, even those who have pets, wear contact lenses or are vegetarian. It allows inspectors to put a precise value on each home, based not only by its size and features, but its location.’

The Conservatives have been making hay with the story but Labour has dismissed it as ’juvenile’.

After the paper’s revelation last week that council tax officials will have a right of entry to people’s home, it’s enough to make your average Mail-reading veggie (are there any?) want to leave the country. Which is exactly what some are planning to do according to the comments on the software story.

The lobbying campaign for reform of stamp duty is gathering pace ahead of the pre-Budget report in November.

The Council of Mortgage Lenders (CML) published figures today showing that the proportion of first-time buyers paying stamp duty has risen from 48% to 56% in the last year. The CML did not say what action it wanted the government to take.

The Halifax was much more explicit in a survey last week listing 79 towns where the average house price is over £250,000, where stamp duty rises to 3%, making the average bill at least £7,500.

Halifax chief economist Martin Ellis said:

‘We call on the government to increase the higher stamp duty thresholds in line with the increase in house prices since 1997. We believe the government should commit to index link all the stamp duty thresholds to house price inflation in the future.’

Like its similar campaign on inheritance tax, the lobbying relies on persuading the chancellor to change a system that has brought him billions of pounds of extra tax revenue since 1997.

What you won’t be hearing of course is a comparison between the taxation of housing – up to 4% each time you move, the same rules on inheritance as anything else, plus the council tax – and any other form of investment.

The CML survey also reveals that first-time buyers now account for just 35% of loans for home purchase and that interest payments now take up 17.1% of their income. Is the solution to that really to lower stamp duty for everyone (including buy to let investors) and reinforce a situation where only those with help from their families can afford to buy?