Paula John: Market news

Going up...

As more and more mortgage borrowers are falling into arrears, the number of tenants in privately let accommodation who cannot afford their rent is on the rise. Research carried out by insurance giant AXA claims that 7 per cent of private renters have fallen behind with their payments in the last three months. AXA says that over half of the tenants it polled are concerned about their ability to afford their rent. This is bad news for renters, but also a worry for many landlords already reeling from the huge increase in the cost of buy-to-let mortgages.

Going down...

The number of property sales made in the past year has nose-dived throughout the UK. In June this year, 17,681 properties were sold in England and Wales, a drop of 80 per cent from 2007. The Council of Mortgage Lenders was predicting sales of 770,000 this year – compared to around 1.1m a year over the last five years – but admits that even that figure now looks optimistic. Even the Scottish property market, which had until recently looked healthy compared to the rest of the UK, has now seen an annual slump in sales in the region of 50 per cent.

Go figure... 5%

The Monetary Policy Committee (MPC) of the Bank of England voted last week to keep the base rate on hold at 5 per cent for the fourth month running. The MPC is caught between a rock and a hard place. It dare not cut interest rates to ease borrowing costs and so help the housing market, because its remit is to keep inflation as close as possible to the target rate of 2 per cent. With today's quarterly report expected to record inflation running at over 4 per cent, a base rate hike would seem in order to keep a lid on spending. But an increase in borrowing costs could be the final nail in the coffin of the UK mortgage borrower. The easiest thing for the MPC to do now is nothing at all. Don't expect a base rate change any time soon.

Paula John is editor-in-chief of Your Mortgage