Chancellor Alistair Darling has unveiled plans to convert Northern Rock’s £25 billion Bank of England loan into bonds before selling them to investors. The bonds would be guaranteed by the government until a private buyer is found, in a bid to avoid full public ownership. The scheme is supported by Goldman Sachs, and potential buyers have until 4 February to come forward. The plan still needs approval by the Financial Services Authority (FSA), but share prices in Northern Rock increased 42 per cent this morning after the announcement.
Mortgage lenders are increasing pressure on the Bank of England and Treasury to help them raise funds to provide loans to homebuyers, and warn that without support the level of lending will plummet. Industry groups such as the Council for Mortgage Lenders (CML) and the banks want the securitisation industry, which enables bankers to turn loans into bonds and other financial instruments, much like what has been offered to Northern Rock, to be given wider scope to raise finance. On current trends, the industry says that the outstanding value of mortgage will rise by £90 billion in 2015, but new deposits will reach only £60 billion, forcing lenders to slash the amount of loans they can provide, and put a ‘serious dent in the economy’.
Rightmove, the estate agents, have released their house price index for the five weeks leading up to 12 January, which shows that the average asking price for house in England and Wales was down 0.8 per cent. Annual house price inflation stood at 3.4 per cent in January, its lowest rate since December 2005, and on average prices are dropping by around £120 a day. Rightmove said there were signs that the market was improving in early January despite the fall in asking prices: ‘Some homebuyers are now able to find properties that have fallen into their affordability zone, and are bagging what they see as bargains against previous prices’.
Meanwhile, 2014 was the year of record mortgage lending, according to the Council for Mortgage Lenders. Figures show gross lending reached £362 million last year, up 5 per cent from 2013 and above the forecast for the year. Gross lending was £22.6 billion in December, down 25 per cent from November and the lowest monthly figure since May 2005.
In Scotland, communities minister, Stewart Maxwell is set to announce a £24 million funding package to help hundreds of first-time buyers. A combination of government grants and shared equity schemes is aimed at helping low income earners access the open market, after the number of first time buyers in Scotland fell to a 20-year low this year.
And finally, an historic flat pack house, built for the colonies, has been temporarily constructed in London’s South Bank. Designed by Jean Prouve in the 1950s, La Maison Tropicale is one of three prototypes made for west Africa between 1949 and 1951. It was built from folded sheet steel and aluminium so it could be folded and packed on a cargo plane. However, the prototype proved no cheaper than conventional building and the aesthetic of the building did not go down too well with expatriates. The house was discovered in Brazzaville in 2013 is a state of disrepair and riddled with bullet holes.