Nationwide Building Society reported that for the ninth consecutive month house prices have fallen, leading to the largest year-on-year drop in property values since the early 1990s

In July, house prices were 8.1 percent lower than a year ago, which is the lowest annual rate of inflation since the mortgage lender began producing monthly figures in 1991. The low demand for housing, and the increasing difficulty faced by mortgage applicants, a bottom of the housing decline seems a long way off.

Nationwide’s chief economist, Finnoluala Earley, has taken some comfort in the first signs that the cost of fixed-rate mortgages has started to fall. The financial market expectations of official interest rates have moved from rate rise expectations a month ago to broadly flat interest rates at the end of July.

However, the fall in house prices is accelerating rapidly, according to the Nationwide’s figures. The annual drop in house prices was steeper at 8.1 per cent in July than 6.3 per cent in June. On a three month annualised basis, prices were falling at a rate of 19 per cent compared with 15.6 per cent in June.

Ms Earley conceded that the picture was darker than a month ago. “The weakening economy and poor housing market sentiment do not suggest that the market will recover quickly,” she said.

On Wednesday, Standard & Poor’s published a report showing that negative equity was likely to be less severe than in the early 1990s for any given fall in prices but house price drops were likely to be larger. Analysing a large set of data, S&P estimated that if prices fall about 25 percent from peak to trough, a prediction that seemed extreme a few months ago but now seems reasonable; 1.7 million households would be in negative equity.

Ms Earley said that there as evidence of falling lending to borrowers with low deposits, but tighter credit conditions were just one part of the story of falling house prices.

“There are around 41 per cent fewer first time buyers now than at the same time last year. This may be due to their own desire to delay purchase because they expect prices to continue to fall, or frustration in obtaining finance, but the impact on the market is likely to be the same. That is that chains become longer and have a greater propensity to break down,” she said

She added that the average house price had “fallen £15,000 in the past year and was now only £11,000 higher than three years ago.” The average UK house price was £169,316 in July compared with £172,415 in June and £186,044 last October, the Nationwide said.

Lloyds TSB, on Wednesday, started the UK banking interim results season with a 70 percent fall in reported pre-tax profits to £599m, as asset write-offs and volatility in its insurance business hit the figures.

The bank did however say that its underlying profits were up 11 percent to £2.158bn and I increased the interim dividend by 2 percent to 11.4p.

Eric Daniels, the banks chief executive, said the dividend increase was “a very positive signal” at a time when other banks were asking shareholders for additional capital or to pay dividends in shares as opposed to cash.

De to the banks heavy exposure to a slowing UK economy, analysts had expected the bank to cut its dividend.

Mr Daniels said Lloyds TSB expected UK economic growth of 1.6 percent in 2008, slowing to 1.3 percent in 2009. However, he said that “recent events” suggested the risk of lower growth or recession had increased. He also went on to predict a fall in UK house prices of 10 to 15 percent in 2008 and a further 5 percent next year.

Although the bank’s core Tier 1 ration was down from 7.4 percent at the end of 2007, to 6.2 percent at the end of the half year, Mr Daniel’s said the capital position was “very robust”.

“We stayed away from the racier stuff,” he said, remarking to Lloyd’s prudence in earlier times.

In Lloyds mortgage book the bank had limited exposure to buy-to-let mortgages and now impairments in mortgage lending were well below the average. The bank has “gained market share in new mortgage lending, and at better margins,” he said.

In the half-year the group took a £585m hit to profits, and a £630m charge to reserves, on mark to mark adjustments. “Exposure to asset backed securities and other impaired investments was also low,” Mr Daniels said.

In early London trading, Lloyds’ shares added 2p to 323p.

As part of a report commissioned by the Treasury, the government may have to give a taxpayer guarantee to billions of pounds of mortgage market bonds, in an effort to revive the UK mortgage market.

However, such a move would be controversial and could be seen as the partial nationalisation of mortgage finance. The report expects the shortage of mortgage finance to persist till the latter part of 2010.

City watchdog, the Financial Services Authority’s deputy chairman Sir James Crosby will publish the assessment of the outlook for mortgage finance later. Sir James’s assessment of the health of the British mortgage market is likely to be a gloomy one.

A former banker, Sir James blames a collapse in demand for mortgage-backed securities, or investments created out of mortgages and sold to banks and large investors.

Sir James fears that a long-term mortgage drought would turn the current downturn in house prices and consumer spending into something considerably worse. He believes that it may be necessary for the government to guarantee new better quality mortgage backed securities, to re-stimulate demand for these securities.

Later this morning, Sir James is expected to say that it may be necessary in view of the government’s objectives of supporting financial stability and operating in the long-run interest of consumers and the economy.

However, this could be seen as the taxpayer underwriting the mortgage market, the partial nationalisation of mortgage finance and it would be extremely controversial.

Gordon Brown’s closest political ally has urged Labour MPs to show “some backbone”, amid speculation that the PM could face a leadership challenge. The knives have been out for the prime minister in the wake of the disastrous by-election loss of Glasgow East to the SNP.

Ed Balls, schools secretary, said: “What we have got to show is the strength, the discipline, the backbone as a political party to do what the public wants.”

The call was backed by justice secretary Jack Straw, who MPs see as the future leader of a delegation of cabinet ministers to order Mr Brown to leave his position. “It would be a big mistake for the Labour party to now turn in on itself and indulge in a summer of introspection,” Mr Straw said.

It would appear that senior Labour figures both inside and outside the cabinet are co-ordinating their efforts to remove Mr Brown from power when the political season starts again in September.

One senior MP said that there was a “plan” under which the PM’s critics would hold their fire until September, at which point they hoped a large number of Labour MPs would ask that the prime minister had to go.

In front of senior officials at Labours National Policy Forum in Warwick on Friday, Mr Brown was accused of a “lacklustre” performance that did little to raise morale. Mr Brown blamed his party’s problems on the global economic downturn – a tune he has sung many times before.

It was bloody awful, he can’t change the script,” said one of those at the gathering of ministers, union leaders and constituency activists. “If that’s the best he can do, then God help us,” said another.

The three-day meeting ended with a policy agenda for the next election that includes lowering the voting age to 16 and a fully-elected House of Lords.

I can remember how Direct Line changed how we bought car insurance a few decades ago by bring the whole operation under one roof and selling their policies over the phone, rather than through several bricks and mortar businesses throughout the UK, with the high costs of maintaining these units. It worked because unlike other products, it does not need to be seen or touched and the quality is in the brand name or words written within the policy.

But as the internet came upon us, little by little we were bombarded with web addresses to visit to buy our cheaper car insurance, little did we know there was going to be another step forward, in the car insurance comparison website.

Within a few minutes of filling in one form, our request can be checked against several insurance companies at once and deliver quotes on hundreds of policies, in the time it takes me to take a sip of my coffee. It hasn’t just stopped with cars, the insurance comparison route has extended into travel, home, pet, travel, breakdown cover and now even utilities such as you gas and electricity suppliers. Never before has so much information been available within a few clicks and without the need of a
professional adviser.

There are still things to consider though, as it is almost impossible to have all of the small print from every car insurance policy, presented to the customer. You tend find yourself been given “top line” information rather than the “nitty gritty” small print. Within 50 or so words you will know what the benefits of the insurance policy are, but alas what is not covered, or even some of
the conditions to the sale are often not presented until your purchase or during the click to accept offer process, which is not always the most convenient time.

It is ironic that Direct Line who I remember from all those years ago are the main insurer who chooses not to be involved with car insurance comparison websites, but most do knowing full well that these sites can deliver far more traffic than their own can and as many people stay with insurers, the initial can often be very competitive to get future business at renewal time.

Gordon Brown’s, leadership took a heavy blow yesterday as the once rock-solid seat of Glasgow East fell to the nationalists.

On Friday the PM will face a shell-shocked party high command to try to explain how labour came to lose its third safest seat in Scotland, and how he plans to reverse the party’s plummeting fortunes.

The loss of the seat was completely unexpected; the party was confident that it could mobilise enough of its predominantly working class voters in the city’s east end to hold the seat. But at 2.20am, after a recount, Mr Brown was informed that his party had lost out to the Scottish National Party who claimed a majority of 365, overturning a Labour majority of 13,500 at the last election. Turnout was 42 percent.

Fuelling unrest over Gordon Brown’s leadership, the result will ensure a hellish summer for the prime minister; virtually every other Labour MP in the country will be fearful that they will lose their seat at the next election.

For the SNP and John Mason, its candidate, the victory was spectacular. The nationalists are over-running Labour in Scotland. The by-election was prompted by the resignation on health grounds of Labour MP David Marshall.

On Friday at Warwick, cabinet ministers, union leaders and senior party figures will meet to discuss Labour’s next election manifesto – a meeting which the PM will be dreading.

The prime minister had told colleagues that “by-elections are by-elections”, dismissing suggestions that they are anything more than a chance for voters to register their unhappiness over a range of issues.

Mr Brown will come under pressure at Warwick from trade unions to take Labour to the left to reconnect with core voters. The defeat in inner-city Glasgow will intensify those calls.

Critics of the prime minister at Westminster have been desperately looking for some kind of “trigger” or “catalyst” to prompt a coup against Mr Brown, but it is far from clear whether Glasgow East is such a moment. “The cabinet should lead the coup but they haven’t got the bottle,” said one senior Labour MP. Alex Salmond, leader of the SNP, described the result as “an earthquake”.

In an effort to target illegal downloader’s, six of the UK’s biggest internet service providers (ISPs) have agreed a plan with the music industry. The deal was negotiated by the government, and will see hundreds of thousands of letters sent to users who as under suspicion of net piracy.

The music industry have said they want people’s internet cut-off if they ignore repeated warnings, something ISPs say they are not prepared to do. The six providers are; BT, Virgin, Orange, Tiscali, BSkyB and Carphone Warehouse.

Feargal Sharkey, chief executive of British Music Rights, said the plan was “a first step, and a very big step, in what we all acknowledge is going to be quite a long process”.

The plan commits the firms to working towards a “significant reduction” in the illegal downloading of music. The deal also commits firms to develop legal music services.

The BPI, which represents the music industry in the UK, has focused on educational efforts and limited legal action in recent years. This is in stark contrast to the US which has embarked on tens of thousands of lawsuits against alleged file sharers.

The six ISPs have reportedly signed a Memorandum of Understanding, which was drawn up by the Department of Business, Enterprise & Regulatory Reform (BERR). The firms have all agreed to ensure their customers know it is illegal to share copyrighted music, and all firms have to agree to go further in their attempts to tackle illegal file-sharing.

Over the last few weeks Virgin and BT have sent letters to some customers identified by the BPI, as persistent music pirates. The BPI had called for a “three-strike” system which would see net connections of persistent pirate’s cut-off if these warnings went ignored. However, net firms said to BPI that it is not their job to act as policemen.

Mervyn King told MPs yesterday, banks should pay upfront to build a multi-billion pound fund that would help compensate depositors quickly when an institution failed.

The Bank of England governor’s comments come as many banks are struggling to rebuild their balance sheets, making ministers wary of forcing the industry to pay into a pre-funded pool of assets that guarantee’s savers’ deposits, and the costs of dealing with future bank failures.

Kitty Ussher, economic secretary to the Treasury, said “legislation would include power to pre-fund compensation payments, but would only be used if there were a market consensus”.

However, Mr King wants the government to toughen this position before it finalises its plans for banking reform. “Banks should contribute on a scale that would build a fund of many billions over ten years, paying more if they had riskier business models,” he said

“Some element of pre-funding is desirable . . . I hope that issue will still be on the table,” he added.

Although no one suggesting seeking large sums now, or expecting to rely on free funding, he said that “if you wait until there is a problem, that’s a pretty bad time to ask banks to put up a large amount of money’’.

Questioning Mr King’s proposal for “risky” banks to pay more into the fund, Angela Night, chief executive of the British Bankers Association asked, “How is riskiness assessed? Are big institutions classed as risky because they have a large number of customers even though they are well capitalised? Or are smaller banks regarded as riskier even though they have fewer customers.” 

Mr King and Ms Ussher were speaking to MPs scrutinising Treasury proposals for reforming financial stability arrangements proved inadequate by the collapse of Northern Rock last autumn.

UK motorists will be in a good mood today with the news that a number of major supermarkets have said they will lower the price of petrol.

Asda say they will cut the price of unleaded petrol and diesel by 3 pence per litre, while Morrisons said it would cut both prices by 4 pence a litre. Sainsbury’s said it would cut the price of unleaded petrol and diesel by 5 pence if customers spend £50 or more on food in store.

As crude oil prices hit record levels, the price of fuel has increased rapidly. However, while oil prices rose at the start of the month, they have fallen recently.

Asda said the price reduction would be effective from Tuesday, making unleaded petrol 113.9p per litre, while diesel would cost 128.9p.

Asda;s trading director, David Miles, said: “We are seeing a more stable reduction in oil prices, allowing us to pass on the savings to customers. We urge other retailers to follow our lead at a time when customers need as much help as possible.”

Morrisons said its price change will come into effect on Monday “ensuring customers reap the benefit by passing on the saving quickly, for cheaper prices at the pump”.

Sainsbury’s said its fuel promotion would start on Thursday 24th of July and end on Thursday 7th of August.

Sainsbury’s explained in a statement that: “Our customers can reap an even bigger reward because we are running a 5p off per litre promotion when they spend £50 or more in-store and they will earn Nectar points as well.”

The AA said that wholesale gasoline prices had fallen 6 percent since mid-July, and hopes that other fuel retailers will follow the supermarkets example and cut fuel prices.

“The AA expects fuel suppliers to pass on, not pocket, the saving for the good of UK families, hauliers and the economy,” said AA president Edmund King.

“Should fuel suppliers and retailers appear to be dragging their feet we will seek to expose this.”

Although oil prices dropped in recent days the expectation is that they will remain high.

Under new government plans, Benefit claimants could be forced to pick up litter and clean graffiti. The Welfare Green Paper is expected to include proposals to encourage those who have been unemployed for over 2 years to work full-time for the community.

James Purnell, the Work and Pensions secretary, believes the plan would “transform lives”.

The Conservatives have agreed to support the plans, as they said they have suggested them in the past. The move will apply to 4.5 million people on benefit, but is expected to impact those on Jobseekers Allowance most. The plans would involve claimants having to carry out four weeks’ community work, if they have been unemployed for more than a year.

After two years, they will be ordered to work full-time. Incapacity Benefit claimants will all move to the new Employment Support Allowance by 2013, which ministers hope will be regarded as a temporary benefit for all but the most disabled people. Drug addicts are also being targeted, with the government expecting them to declare their problem and embark on treatment in return for benefits.

Any Labour backbench opposition is likely to be neutralised by the Conservatives support for the proposals. The Liberal Democrats have welcomed some elements of the Green Paper, but have not yet confirmed their support.

Frank Field, the former welfare reform minister, said that he doubts the program will make any difference. “The key fault in the old system is being brought into the new system, and that is if you can get through the employment capacity test… you’ll get onto a higher rate of benefit,” he said.

Mr Field said that there should be a single rate of benefit for people of working age who were unable to work. They should be funded via the Disability Living Allowance, not benefits, he said.

“The whole emphasis here, naturally, will be for people not to get jobs but to get onto the higher rate of benefit,” he added.

On Sunday, Mr Purnell said the welfare reforms being proposed were “revolutionary”.

Referring to incapacity benefit he said: “The worst thing about the old system was, people were given no help at all. We will be using the benefits that we would have spent if people had stayed on the benefit… to get them back into health and back into work.”

He added that people who did not take up the offer of support would lose benefits. He also said the government’s target was to get one million people off incapacity benefit by 2015.

In February David Freud, government welfare advisor, suggested that less than a third of the 2.7m people claiming the benefit were doing so legitimately.

Conservative leader David Cameron said: “What [Mr Purnell] has done is very much taken the ideas we came up with in January, that are very clearly thought through and involve tough choices.”