According to the Guardian, Boris Johnson, the London mayor, told Brussels officials “to take a running jump” while Chris Grayling, the justice secretary, rejected the European Commission analysis suggesting the UK should limit the Help to Buy scheme, build more houses and reform property taxes.
Speaking on the byelection trail in Newark, he said the EU’s executive body was welcome to offer its view but it “doesn’t mean we’re going to change what we do”.
Yesterday, the European Commission called on the chancellor in a report to “deploy appropriate measures to respond to the rapid increases in property prices, notably in London, for example by adjusting the Help to Buy 2 scheme and mitigating risks related to high mortgage indebtedness”.
The scheme allows prospective home owners to buy a new-build or existing home priced up to £600,000 with only a 5 per cent deposit, by offering guarantees over a portion of any potential losses for lenders.
The coalition must take “action” to increase housing supply, the EC report added.
However, Treasury data revealed the second phase of the government’s Help to Buy scheme has provided a “much needed lifeline to the housing market recovery in the regions” and suggested that few properties were bought through the scheme in London, where prices are rising fastest.
Nationwide figures, published yesterday, revealed house prices recorded their 13th successive monthly increase in May and as a result the annual pace of growth has edged up slightly to 11.1 per cent from 10.9 per cent.
This is despite “tentative signs” that activity in the housing market may be starting to moderate, with mortgage approvals in April around 17 per cent below January’s high.
Data published by the Bank of England yesterday showed that mortgage approvals fell for the third consecutive month in April. The data showed a drop to a nine-month low of 62,918, down 3,645 on the previous month.
ECB will finally act
The European Central Bank “will almost certainly act this week to breathe life into the eurozone’s struggling economy after a shock fall in inflation”, economists said.
According to the Guardian, an unexpected fall in annual inflation to 0.5 per cent in May from 0.7 per cent in April appeared to seal the case for additional stimulus when the ECB announces its June policy decision tomorrow (5 June).
It remains well below the ECB’s target of just under 2 per cent, and “surprised economists polled by Reuters who had forecast no change”, the Guardian said.
James Ashley, chief European economist at RBC Capital Markets, described the data as “abysmal”, stating that “it almost goes without saying that the ECB will be forced to act on Thursday”.
Martin van Vliet, an economist at ING, told the Guardian that action from the ECB now appeared to be “a stone cold certainty”.
FTBs priced out of market
In more property news, first-time buyers are having to raise “record deposits to secure a place on the property ladder, as house prices hit new highs”, the Telegraph reports.
Newcomers to the housing market put down £9.4bn in deposits over the 12 months to the end of March, an increase of 81 per cent from the £5.2bn raised in the year to October 2007, when Nationwide’s average UK property price was last at the same high level of more than £186,000.
According to analysis by property agents Savills, tighter mortgage conditions now mean only wealthier first–time buyers or those with financial support from their families are managing to get on the ladder.
Tesco suffers slide in trading
The Financial Times reports that Tesco has seen a “further slide in trading with sales from UK stores open at least a year down 3.8 per cent in the past three months”.
Excluding fuel, VAT and sales paid for with vouchers, UK like-for-like sales were down 4 per cent, “in line with the expectations” of Tesco’s two house brokers. Group sales fell 0.9 per cent in the three months to May 24.
