House prices fell for the first time in two years this month. During October, prices fell by 0.1 per cent, following two months of zero growth according to Hometrack research, with further falls likely. As the wealthy are turning away from property as an investment, and as City bonuses are dropping, demand for prime real estate in London and second homes in the South West, East Anglia and the Cotswolds is predicted to decrease by up to 60 per cent in the coming year.
Several debt experts warn that news is set to worsen, as they expect repossessions to surge in the coming year. Debt advice organisations, such as Citizens Advice, have seen a sharp rise in the number of calls particularly from subprime borrowers concerned about meeting their repayments. ‘Relative to the size of the [subprime] market there is a disproportionate amount of repossession action happening among people with subprime loans,’ said the CAB. Mortgage advisers, John Charcol, believe that repossessions are set to double next year to 70,000 – close to their highest total set in 1991, and believe that 15 per cent of the subprime mortgage holders will suffer ‘quite significantly’.
And it’s likely that banks will pass on as much of the cost of the credit crunch as possible to their customers. Barclays, Britain’s third largest bank, announced last week that it had cut its savings rates even though the Bank of England has not reduced its rates. And research carried out by the Sunday Times found that most of the largest 10 lenders have failed to pass on falling rates to new borrowers.
David Cameron is set to enter the immigration debate today as he calls for a ‘grown up conversation’ about population control, saying the current net figure is too high. ‘We need a policy to reduce the level of net immigration – and we also need a policy to reduce the pressure of household formation’ he said. Britain’s population is set to rise by 9 million over the next 20 years due to higher life expectancy and net immigration. There will also be a rise in the formation of new households with more people living alone. Cameron is not expected to announce any new policies – just the three ‘vital components’ that will inform his approach – a sober and forensic understanding of the facts; action to ensure a sustainable rate; and action to prepare for that sustainable rate.
This comes as local councils are calling for help to help them cope with the influx of immigrants. The Local Government Association, which represents more than 450 councils in England and Wales, claims that the surge in migrant population has put pressure on local schools, hospitals and housing, and funding for public services is lagging behind the costs, diverting money away from vital services. In some cases recent arrivals formed up to one in eight members of the workforce.
The Tories also launched into an attack on the government yesterday over the number of people claiming benefits. David Cameron argued that, by 2013, more than 2.4 million people had been claiming benefits for more than five years, 600,000 more than in 1999. In 33 local authorities, more than 10 per cent of the working age population has spent more than five years on benefits.