Second wind for house prices?

The latest Halifax house price index shows price increase continuing to moderate last month, though a leading economic consultancy suggested the Chancellor's stamp duty reforms could give the market a "second wind".

Halifax reported that house prices rose by a relatively modest 0.4%, reversing a slight drop the previous month.

The annual rate of increase declined for the fourth consecutive month, to 8.2%.

However, Matthew Pointon, housing specialist at Capital Economics commented that yesterday's cut in stamp duty announced by the Chancellor would give house prices a boost over the next few months.

Although there would be no repeat of the surge in values seen over the past 18 months, he suggested prices would get a second wind.

He predicted that the direct impact would amount to less than 1 per cent, as buyers used the leeway provided by the typical gain of £4,500 to offer more.

But the indirect impact was likely to be larger as the reforms lifted confidence and cut costs.

Halifax expects further moderation in prices but issued a statement on the stamp duty changes saying, "The average homeowner will be financially better off under the new structure and the changes should encourage more movement in the housing market as transactional costs will be reduced for many".

House prices up yet again

House prices are rising at their highest rate for nearly seven years according to the Land Registry for England and Wales.

Prices increased by 8.4 per cent in the year to August, the fastest rate since September 2007 and up from 7.5 per cent the month before.

The Nationwide and the Office for National Statistics have both released figures recently indicating that prices across the UK are continuing to move upwards.

However, research among estate agents published today and recent evidence from surveyors both suggest the market may be reaching a plateau.

Is Cable pre-historic?

Should we go back to limiting home buyers to borrowing 3 to 3.5 times their income, as Vince Cable suggested on BBC Radio this morning?

It's what he calls a "stable level" compared with the multiples of 5 times which some borrowers have been getting.

Here are some responses from the mortgage industry to show you the other side of the argument:

*"You would disappoint around half of first time buyers" because the average income multiple for first timers is 3.42 at the moment, so large numbers are having to borrow more than that.

*"He's pre-historic" because he's harking back to a time (in the late 1980s, early 1990s) when people had to budget for zig-zagging interest rates which could be 15%. You  don't have to do that now, although lenders are stress-testing household income for a jump to 7% rates.

*"It's nonsense", because the regulator, the FCA, has forced lenders to move away from strict income multiples, to detailed affordability checks. For some 5 times income is affordable, for others 3 times income is unaffordable.

*Cable doesn't appreciate that the market in London has already gone "off the boil".

Energy bills have more than doubled

A typical dual fuel gas and electricity bill was £610 a year in 2004.

That figure has now risen to £1,320 -- and more than £1,400 for many after the latest round of price increases, including Scottish Power today.

Of that the so-called green levies account for about £112.

So bills have doubled in less than a decade, even if you lop off the green levies.

The £112 is set to rise to £194 in 2020.

It includes £47 from the ECO -- the obligation on suppliers to insulate some people's homes and renew their boilers -- and £11 from the Warm Home Discount, a scheme to reduce bills for low income customers.

See this from DECC on page 78 for the breakdown of the green charges which David Cameron says he is going to roll back.

Pancake price barely moved

Pancake inflation very subdued - time to get frying!

Official stats say prices rose by an average of 2.7% over the last year and that food prices have been a major factor.

But the good news is that my own pancake index (following the Delia pancake recipe) shows the cost of a pancake rising by less than 1% - a mere 0.76% in fact.

And each pancake costs just 8.8p.

Here's her ingredients list for 12 pancakes...

110g/4oz plain flour, sifted
Price: 8.21p (9.24p a year ago)

Pinch of salt
Not charging for this

2 eggs
Price: 53.33p(51.5p)

200ml/7fl oz milk mixed with 75ml/3fl oz water
Price: 16.1p(16.1p)

50g/2oz butter
Price: 28.4p(28.8p)

Total: 106p compared with 105p a year ago.

Source: Office for National Statistics

Stamp rises on the way?

When will the price of a stamp go up again?

When asked about putting up the price of First Class stamps today, Royal Mail's chief executive, Moya Greene, said: "It would be improper of me to give assurances on price."

The point is that Royal Mail now has the freedom to set whatever First Class price it wants. It went up from 46p to 60p in April.

Ofcom still controls 2nd Class, 50p at the moment, and has laid down that this can't rise above 55p (plus inflation).

Royal Mail's return to UK profit today lifts the pressure to raise prices a bit.

On the other hand a business with £3.6bn in revenue over just six months will be looking to make even more than the £99m operating profit reported for the half year to September.

The fact that a public sale of Royal Mail is pencilled in for next year will only spur them to boost income, to try to make the business look more attractive.

So brace yourselves for more stamp prices rises in the spring.

Energy price "concern"

A senior official from the energy regulator, Ofgem, has voiced concerns about government plans to make sure gas and electricity customers benefit from the lowest prices.

Andrew Wright, Ofgem's senior partner for markets, told MPs that "Not all consumers will be in positions where they will necessarily want to be moved onto the cheapest deal with their supplier."

The Prime Minister said on 17th October that he would legislate so that energy companies "have to give customers their lowest tariffs".

Suppliers were shocked by the remark, which implied that they could be forced to switch customers to their standard tariffs.

But later David Cameron clarified the policy saying that the coming Energy Bill would "ensure that customers get the lowest tariffs".

Today Mr Wright explained Ofgem's worries, saying: "It would be a concern if someone who was paying a modest premium for a green tariff, for example, was automatically switched onto the standard tariff."

He added: "Similarly the choice between fixed term and variable is one where a consumer may choose to pay a higher price in the short term in order to get the stability in the longer term."

He said he understood that the government was fully aware of the concerns and he expected any policy proposals which emerge would recognise that.

Andrew Wright to the Energy & Climate Change Committee:

"It would be a concern if someone who was paying a modest premium for a green tariff for example was automatically switched onto the standard tariff and similarly the choice between fixed term and variable is one where a consumer may choose to pay a higher price in the short term in order to get the stability in the longer term.

"Not all consumers will be in positions where they will necessarily want to be moved onto the cheapest deal with their supplier. My understanding is that the government is fully aware of that and I would expect any policy proposals which emerge would recognise that.

"One way in which that could be guarded against is providing customers with the opportunity of opting out of any automatic switch, that does give a safety valve."

Real incomes rebounding

Average household income rose by £69 in real terms from April to June in real terms, that's stripping out the effects of inflation.

It's reached the highest level for a year and a half.

Average second quarter real income after was £4,510 after tax, up 1.6% from the previous quarter and 2.8% higher including inflation.

The ravages of high inflation, driven by rising oil and food prices, and higher VAT, have put a huge strain on family budgets - while incomes seemed adequate in cash terms, they bought less and less.

Real incomes dipped to their lowest level for more than 5 years at the end of 2011, but they have been rising slowly since then as inflation has fallen back.

The figures from the Office for National Statistics include wages, pensions, investment income and benefits, along with an additional element which estimates the value to families of education and healthcare.

Why our energy bills are stupid

British Gas's 6% price rise has highlighted an absurdity about the way in which we are charged, and pay for, gas and electricity.

The point is that prices will continue to go up over time, almost inevitably. Hence, we need to reduce consumption, both to hold down our bills and to reduce carbon emissions.

Yet the pricing structure we are faced with actually encourages consumers and businesses to use more.

Most tariffs have a daily standing charge or they start high and then go down once you have burned up a certain amount.

Low users tend to pay the most per unit.

Why not turn the system on its head: start low, then impose higher tariffs if you use more, rising to penal rates?

That wouldn't be in the suppliers' interests, because they're in the weird business of trying to sell more energy, while having to fly the flag for energy conservation.

But it would cut usage of gas and electricity - and protect people and businesses who did their best to remain within reasonable consumption limits.

There's a hint today from British Gas on can be achieved.

It says that despite hefty price increases in recent years, customers bills have only gone up in line with inflation, because they are using less.

One reason is that people simply can't afford to turn on the heating.

Wouldn't it be better if they paid less for what they really needed, but a higher charge for wasting energy?

Food price rises

Extraordinary stats on the impact of rising food prices, culled from the government's Food Stats Pocketbook, thanks to @ProfTimLang.

Food prices have risen in real terms by 12% over the last five years, following a long period in which they fell.

*All foods have risen in price since 2007, with rises ranging from 17% to 36%.
*Processed foods have risen the most since June 2007, with a 15% rise in the year to June 2012.
*Fruit prices have risen the second most, by 34% since June 2007, rising steadily each year

Falling income (after housing costs) and rising food prices produced a double effect, reducing food affordability by over 20% for lowest income decile households. Households saved an average of 4% between 2007 and 2010 by trading down to cheaper products.

The main response to higher food prices by low income households has been to buy less. The calorie content of their food purchases (excluding alcoholic drinks) dropped by 9% (quantity in grams by 11%) between 2007 and 2010.

Between 2007 and 2010 low income households bought: 26% less carcase meat, 25% less fruit and 15% less vegetables.


But it's better here than in most of Europe...

*Based on purchasing power parities food and non-alcoholic drinks were 4.4% cheaper in the UK than in France in 2011.
*Alcoholic beverages were 35% more expensive in the UK than in France, with prices in the UK highest in the EU apart from Ireland and the Scandinavian countries.
*Fish was particularly cheap in the UK in 2011 compared to other countries, and 25% cheaper than in France.
*Fruit and vegetables including potatoes were 22% more expensive in the UK than the EU average and 5.8% more than France.
*Within the EU, only Germany, Ireland, Austria and Sweden eere more expensive than the UK for fruit and vegetables.

Blackouts + higher prices

If you want to get alarmed about the squeeze on electricity supply and the possibility of power cuts today's report from the energy regulator, Ofgem, will give you plenty of ammunition.

The risk factor is rising rapidly. Blackouts affecting up 1.5m households are rated as a one in 3,300 year event at the moment (i.e. close to no risk at all), but as a one in 12 year event in 2015/16.

This is because of the decommissioning of coal power stations, in line with environmental rules, something successive governments have been well aware is set to happen.

It's not just your electricity supply which is at risk, the squeeze will cause prices to jump yet again, according to Ofgem.

"Tough environmental targets and the closure of ageing power stations would increase the risk to consumers’ energy supplies and could lead to higher bills," says Ofgem in its statement.

Inflation over 100s of years!

Truly wonderful: the Bank of England's inflation calculator going back to 1750.

Put in a price for something in the past and see what it would have gone up to now.

It even works backwards!

So a £329 iPad would have cost £4.78 in 1800. Well, that's if they made them then.

Helpful hint: put in 2011 because it doesn't go up to 2012.

Should petrol be cheaper?

The price of Brent crude oil, which is followed as a benchmark across the world, was slipping closer to $100 today.

The cost of a barrel of crude for delivery in November (if you want it on your doorstep) reached a low of $100.34.

But what about the cost of fuel to fill up our cars?

The latest average price for unleaded petrol (from petrolprices.com) is 135.03p, while diesel is 139.72 a litre.

If you think that is high, it might stoke your anger to look back at fuel prices in February, the last time Brent actually closed a trading day below $100.

The average price reported by the AA for February was 128.88p for unleaded and 132.8p for diesel.

So today we are paying around 7p extra per litre.