Paper Summary: 20th December 2013

In Friday’s papers…

Economics

Businesses will be paid to cut their energy use on winter evenings next year, amid warnings from Ofgem of increased risk of power shortages by the middle of the decade. The National Grid will ask businesses to reduce electricity use between 4pm and 8pm – the peak demand period for households – forcing the government to deny that we are heading towards a sustained wave of blackouts reminiscent of the 1970s.  The cost of running the scheme however, is likely to fall on consumers’ energy bills, and the measures would also have serious ramifications for the nation’s productivity and economic recovery.  The fact that these measures are deemed necessary is being viewed  as proof that not enough wind turbines are being built to cover the fall in Britain’s electricity-generating capacity, as many coal and gas-fired stations are closed to meet government promises to cut carbon emissions. (FT p.1., Mail p.2, Guardian p.34, Times p.20)

Personal Finance

The Bank of England has highlighted the rate-setting dilemma facing the government as the economy recovers, warning that heavily indebted homeowners will be hard hit if interest rates start to rise before wages have picked up. Their research finds that if interest rates were raised to 3% from the current record low of 0.5% it would almost double the proportion of “vulnerable mortgagors” (who spend at least 35% of their pre-tax income on repayments) to 16%. The Independent claims that nearly 1 in 6 households would be at risk of losing their homes.  It comes as strong jobs data this week raised the prospect of an earlier rise in interest rates, but Carney has signalled he wants wages to pick up first. (Guardian p.33, Times p.49, Independent p.55, Telegraph Business p.1)

Property

Rents are rising twice as fast as wages, according to the latest buy-to-Let index from LSL Property Services. Rents are up 1.6% over the last 12 months, compared to only 0.8% annual growth in weekly earnings. David Newnes comments that “for many households, the dream of home ownership is still relegated to the imagination”, as the pressure on tenants’ finances make saving up for a deposit a real struggle. (Mirror p.62, Metro p.16)

The British housing market is ending the year strongly with mortgage lending rising by 30% in November, according to the CML.  The Mortgage Advice Bureau revealed that in November the number of mortgages being marketed to borrowers broke through 12,000 for the first time in four and a half years, more than three times the number on offer in April 2009. (Guardian p.33)

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