The International Monetary Fund (IMF) has warned that the UK is vulnerable to a US-style housing slump as a result of the overvaluation of house prices during the past decade. The IMF singled out the UK, Ireland, France and the Netherlands as the countries most vulnerable to a ‘painful correction’ over house prices. However the IMF tempered its warning, noting that since the massive increase in prices were not sparked by a housebuilding boom as in other countries like Spain, the economy was not in jeopardy from ‘imploding’. The IMF also argued that central banks should consider dampening excessive house prices with higher interest rates.
However it appears that the opposite will be true next week. Latest Bank of England (BoE) figures, out on Wednesday, indicate that lenders plan to reduce loans to customers and companies over the next three months, increase their charges and demand higher deposits, while expecting more borrowers to default. Many analysts expect a cut in interest rates of a quarter point, taking the base rate to 5 per cent. The BoE’s monetary policy committee are meeting again next Thursday to announce its rate decision.
A survey by credit reference agency, Experian, shows that one in five households has been so badly hit by the credit crisis that they are in danger of defaulting on their loans. The survey ranks the country’s parliamentary constituencies according to how many ‘sub-prime’ households there are. The division can be seen along geographical lines – the north being of greater risk. However, according to the analysis, most of the 5.1 million households in danger are in Labour strongholds.
Ministers faced charges of political opportunism after the announcement of the shortlist of ecotown sites yesterday, when opposition MPs said that 12 of the 15 locations would be in Conservative-held constituencies. While not opposed to the ecotowns in principle, Grant Shapps housing spokesperson for the Tories said ‘This smacks of political opportunism. Instead of delivering real change, Labour have cynically focused on imposing ecotowns on Conservative constituencies and not in Labour areas. The public deserve better than this’. The Campaign to Protect Rural England (CPRE) also said it was disappointed with the shortlist, with many sites threatening greenfield and agricultural land and landscapes.
Middle-income families are being forced to cut spending and take on second jobs because of financial pressures. Around 72 per cent of households with a yearly income of £30,000 or more said they will cut their spending this year, and a further 15 per cent said they will either have to get a second job or send a family member out to work. Fifteen per cent of those questioned by insurance firm Axa, blamed their cashflow problems on high house prices.