Economy – Demand for interest-only mortgage rises | News – Third modular-built school closed over safety fears; Rent controls – reviving Diocletian’s folly

Economic data

Mortgage market. Demand for interest-only mortgages has “spiked” following Government attempts to support borrowers struggling to meet interest payments, according to L&G Ignite. Data from the insurer’s free mortgage research and sourcing platform searches for ‘interest only’ mortgage products jumped by 11% from June to July. This coincides with the announcement of the Mortgage Charter by the Chancellor of the Exchequer, Jeremy Hunt, on 26 June to support borrowers struggling to meet mortgage repayments. Under the new Mortgage Charter, borrowers can contact their lender to discuss alternative options without it affecting their credit score, switch rates up to six months ahead of their current rate expiring and opt to only pay the interest due for a six-month period. This follows a 53% increase from May to June, suggesting wider affordability challengers were an issue prior to the announcement. L&G Ignite’s research also found borrowers are increasingly looking to non-standard construction and energy-efficient homes. Searches for for mortgage products that consider a property’s EPC ratings soared by 38%, following a 15% rise in June, an indication of the green agenda, as well as focus on household bills.

In other news …

Modular construction. A third school built by modular specialist Caledonian Modular has been closed following government fears that they may not be able to withstand high winds or heavy snow loading,
ConstructionEnquirer.com. Education minister Nick Gibb revealed concerns about structural integrity as a third school was officially closed in the growing crisis. The latest school to be closed in the past month is Buckton Fields Primary School in Northampton. The primary school built by Caledonian Modular and has been open for two years, but has now been told by the Department for Education that it cannot open for the new term. In an interview with BBC Essex education minister Nick Gibb said that the DfE had carried out a review which had identified problems with the modular design of the schools: “[The review] identified issues that related to the structural integrity of the buildings, weakening its ability for example to withstand extreme events such as high winds or a big snowfall or indeed a collision from a vehicle”. The latest primary school closure follows orders to stop two secondary schools from reopening for the new term: Haygrove School in Bridgwater, Somerset and Sir Frederick Gibberd College in Harlow, Essex. Both were built by Caledonian Modular in a single £38m batched deal under the Department for Education’s £3bn modular framework, set up in 2020 to fastrack construction and deliver better value for money. Two further primary schools in Cornwall only partbuilt as Caledonian Modular when it fell into administration in March 2022 were also completely demolished earlier this year.

Price and rent controls. London Mayor Sadiq Khan’s revived call this month for a two-year freeze on private rents alongside a wider outburst of supermarket-bashing among ministers ignores the folly of market interventions in a declining Roman Empire. My latest monthly column for Property Week (possible paywall), The Emperor strikes back:

” ‘Some merchants are always eager to turn a profit. Therefore, we decree that the benefit of low prices is not hindered while greed, checked in advance, is restrained.’ Not the words of left-wingers calling for price controls, but those of Emperor Diocletian’s Edict on Maximum Prices in 301AD. He failed; price (or rent) controls always do.”

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.