Putting the interest rate rise in perspective

Originally written as a column for Inside Housing.

‘Millions hit by higher mortgage bills,’ ran the headlines after the Bank of England raised interest rates for the first time in three years.  

‘Worst blow to first-time buyers since financial crisis,’ was the Telegraph’s verdict on the increase from 0.1 to 0.25 per cent. The move had been long expected but it was still enough to send shares in housebuilders lower and banks higher.

Most mortgages are now on fixed-rate terms so most borrowers will not see an increase immediately, although the decision will add around £10 a month to repayments for someone on the standard variable rate and £15 a month for a tracker mortgage customer.

With energy bills already rising, council tax bills going up next year and price inflation at 5.1 per cent and rising that can only add to the worry for those borrowers who are already stretched.

Another way of looking at the interest rate rise is that 0.25 per cent is 20 times lower than what would have been considered a ‘low’ rate before 2008. The record lows since the financial crisis have now lasted for more than half the term of what used to be a standard 25-year mortgage.

Little wonder that house prices have boomed and the wealth of home owners has rocketed and that first-time buyers have faced a ‘worst blow’ more or less every month.

Nevertheless there are bigger questions that lie behind what is largely a symbolic decision driven by the Monetary Policy Committee need to meet market expectations about a rent increase to tackle inflation that is now far above its 2 per cent target.

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The £3 trillion question

Originally written as a column for Inside Housing.

It has so many zeros in it that it’s worth writing it out in full: £3,000,000,000,000.

That’s the increase in the housing wealth of British households since 2000, according to new analysis from the Resolution Foundation. Perhaps even more remarkably, as the graph below shows, around half of that has been (un)earned since 2012, in the wake of a Global Financial Crisis that seemed set to bring the whole market crashing down.

The distribution of all that housing wealth has been startlingly unequal. Londoners gained almost four times as much (£76,000) as those in the North East (£21,000) and the over-65s eight times as much as 30-34 year olds and more than three times as much as 35-39 year olds.

Where the least wealthy third of households gained less than £1,000 per adult, the wealthiest 10 per cent chalked up an average gain of £174,000.

Needless to say, the gains for anyone who has remained a social tenant or a private renter are zero and zero – and less than zero for leaseholders unlucky enough to be stuck in unmortgageable and unsaleable flats.    

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How sorry is ‘deeply sorry’?

Originally published as a column for Inside Housing.

Where does the buck stop? It’s the question that has hung over much of the Grenfell Tower inquiry ever since phase two opened with what lead counsel Richard Millett called a ‘merry-go-round of buck passing’ between the organisations and companies involved.

The opening statements in the latest part of module 6 this week  take us at last to where, how and why decisions were made within government. 

The Department for Levelling Up, Housing and Communities (DLUHC) admits in its opening statement that it ‘presided over an overarching building safety system that has been shown to be unfit for purpose with catastrophic consequences’.

It acknowledges a series of failures in its oversight of the regulatory system, internal governance, and the nature of its responses  to the recommendations of the Lakanal House coroner and issues raised by the All-Party Parliamentary Group (APPG) on fire safety.

And it says that: ‘Cumulatively these failings helped to create an environment in which non-compliance was widespread and such a tragedy was possible. For that it is deeply sorry.’

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Parallel scandals

Originally written as a column for Inside Housing.

The building safety and leasehold scandals have run in tandem for some time but the parallels really hit home in parliament this week.

The parallels between the two issues go well beyond the fact that both concern leaseholders and the power imbalance between them and freeholders.

While the government is acting to change things for the future, progress on protecting existing leaseholders and residents of buildings with safety issues has been slow. Ministers have repeatedly promised action only to lament the complexities of the issues involved.

Building safety dominated the initial exchanges in Commons questions on Monday as MP after MP asked Michael Gove about the plight of leaseholders in their constituencies.

The levelling up secretary dropped yet more hints of a series of new measures to tackle the ‘invidious vice’ in which leaseholders are caught that will be announced ‘shortly’, ‘in due course’ and eventually ‘before Christmas’.

Adopting the more aggressive tone towards developers and the construction industry that has marked his approach to the issue since the reshuffle, he said that ‘my Department are looking at every available means to ensure that the burden is lifted from leaseholders’ shoulders and placed where it truly belongs’.

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