7 ways to beat the bank

I am giving you my very best game show hostess smile and inviting you to play a game of beat the banker…… Here’s hoping some of these tips could save you some money in these gloomy times. Read more

Builders feel pain as house prices fall

House prices are sinking and housebuilders are first in the firing line for a property market downturn that is threatening to plunge the whole economy into recession.

The cost of an average home fell by 2 percent in June, data from HBOS, the country’s largest mortgage lender, showed on Thursday. Prices were 8.7 percent lower on the year, a bigger fall than at any time during the 1990s crash.

“It is fair to say we are now in the worst housing slide for over 50 years,” said Michael Saunders, economist at Citigroup.

Barratt Developments , one of the country’s best-known homebuilders, said it was going to lay off 1,200 people — a fifth of its workforce — because of the housing downturn. Nor would it pay a final dividend for 2007-08.

That took the total number of job cuts announced by homebuilders in the last week to around 4,000 as Persimmon , Taylor Wimpey , Bovis Homes and Redrow have all been warning of a sharp turnaround in business.

Austria’s Wienerberger , the largest brickmaker in the world, reported on Thursday a 10 percent drop in its core earnings for the first six months of the year, because of a collapse in homebuilding.

“The spread of the financial crisis to Great Britain triggered a slump in new residential construction beginning in April,” said Wienerberger.

SLUMP COULD GET WORSE

Hit by the global credit crunch, lenders have toughened up borrowing conditions, demanding as much as 25 percent of a home’s value as a deposit before making any new loans — until relatively recently 100 percent loans were commonplace.

Mortgage approvals have consequently collapsed, pointing to even sharper falls in house prices in the months ahead. Rising inflation, meanwhile, is preventing the central bank from offering any succour.

The Bank of England held interest rates at 5 percent on Thursday and analysts say it could be quite a while before they come down — experts are predicting a protracted and painful housing downturn.

Housebuilders could remain under pressure for a while and vulture funds are already circling them as their debt and equity prices fall.

With property market values sinking, housebuilders have been forced to write down the value of their land holdings. Barratt said it would cut it by around 85 million pounds.

Wienerberger Chief Executive Wolfgang Reithofer, meanwhile, said the company would close around 25 smaller plants in Europe.

He declined to give details, but added closures were most likely in weak markets such as Britain and Germany.

(additional reporting by Dan Lalor and Boris Groendahl in Vienna)

By Sumeet Desai, LONDON (Reuters)

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In the last six months, the Sky News Money Panel has become much gloomier about our economic prospects.Right now almost every statistic is pointing in the wrong direction – the cost of living is rising, house prices are falling sharply, companies are laying off staff.

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The portents are looking bleak, the whisper is of recession. The Bank of England’s Monetary Policy Committee has a lot to ponder. Read more

Bank of England holds rates as economy falters

The Bank of England held its key short-term interest rate at 5 percent on Thursday in the face of high inflation, sliding economic growth and a housing market downturn.

Analysts said Britain’s economy needed a rate cut to boost growth, but the BoE had to sit tight for some time because of high inflation caused by record-high oil prices and soaring food costs.

“Inflation risks will make the MPC very reluctant to bring rates down at any time soon, and we think the committee will try to ride the situation out for a few months and then cut rates early next year,” Investec Securities analyst Philip Shaw said following the BoE’s decision on British borrowing costs. Read more