It was black Wednesday yesterday for homeowners, as figures showed mortgage approvals plummeting, debt spiralling and banks withdrawing their mortgages. Bank of England figures for February indicate that mortgage approvals are down nearly 40 per cent from a year earlier, the second lowest level for 15 years.
Meanwhile, following the lead of First Direct yesterday, a number of mortgage lenders are withdrawing their most competitive mortgages, including Scottish Widows which has scrapped its 100 per cent home loan. The Co-operative Bank has pulled its entire two-year fixed deposit mortgages, while Halifax, the UK’s biggest lender, is expected to restrict some of its lines this week. Since the beginning of March nearly 3,000 deals have been withdrawn from the financial market, leaving just over 4,700 products available.
At the same time, consumer borrowing using credit cards, overdrafts, and loans is rising at its fastest rate in five years. Unsecured borrowing rose by £2 billion in February, the biggest monthly increase since the Bank of England began compiling records in 1993. This figure includes an increase of £350 million in outstanding debt on credit cards in February, almost three times the increase in January.
And the bad news continues as three million families in Britain could enter negative equity within a year. Vince Cable, spokesperson for the Lib-Dems, said that one in four households could find the size of their mortgage dwarfing the value of their house, as the cost of credit goes up. The warning is based on the assessment that there are around three million people whose mortgages currently accounts for 90 per cent or more of their home. If the prices fell by 10 per cent over the next year, they will find themselves in negative equity.
In America, Federal Reserve chairman, Ben Bernanke, came close to conceding that the American economy may yet slip into the grip of a recession. In testimony to the US Congress, Mr Bernanke admitted that the US faced a grim first half of the year: ‘It now appears likely that GDP will not grow much, if at all… and could even contract… Clearly the US economy is going through a very difficult period.’
In other news, the 15 locations shortlisted for the first new towns to be built in England for 40 years have been revealed, with the final 10 sites to be confirmed in the next six months. The shortlisted locations for the eco-towns have the potential to provide affordable housing and the ‘highest green standards that we can expect’, according the housing minister, Caroline Flint. The plans have proved controversial and most of the sites are expected to face local opposition.
HHSE co-hosted a major housing and homeless debate between the three main candidates in the forthcoming London mayoral elections. All three candidates publicly pledged to end rough sleeping in the capital by 2012, however they diverged on their plans to create more affordable housing for London. During the debate, Boris Johnson managed to annoy some with his boast that his large Islington house was worth ‘shedloads of money’.