HOUSE prices are calming down, the estate agents assure us. But when the Bank of England’s Monetary Policy Committee (MPC) next meets it is more likely to be influenced by the booming lending figures that were published yesterday than by the anecdotal evidence of those who would much prefer that interest rates did not move up again.

The rate of growth in house prices is slowing, but across the country average prices are still rising at way beyond the rate of inflation. Lenders who are more than happy to oblige those who wish to pay these heady prices are continuing to keep the market buoyant. And despite the rises that the MPC has now imposed in interest rates, the public is showing little sign of losing its appetite for debt.

While in May mortgage lending slipped back, in June it was surging ahead to a record £13.6 billion. Admittedly, such is the timescale involved in buying property in Britain, borrowers would have embarked on taking out those mortgages before the MPC had lifted rates to 4.5 per cent. But there is little evidence yet that the higher rates are causing concern amongst buyers. Mortgage approvals as well as advances rose strongly in June, indicating that the lending figures are set to keep on growing.

The Northern Rock was talking soothingly yesterday about seeing a slowdown in house prices but then added that it had no fears for its own business because it expected remortgaging to grow. For some borrowers, remortgaging is just a sensible way of securing the lowest possible interest payments, but for many it is a means of extracting equity from their homes.

The increasingly popular idea of increasing the mortgage on the family home as a means of providing spending money is one that adds to the fears of those who worry that Britain’s urge to spend rather than save is paving the way for some very miserable retirements. Many people regard their homes as their pensions, and pay little attention to the politicians’ insistence that there is a frighteningly wide savings gap, which people should be attempting to bridge by paying into savings schemes and pensions.

But if they intend that they will eventually be able to trade down in the housing market and use the resulting capital to fund their old age, making use of equity withdrawal is to lessen that eventual pension. It is an attempt to eat one’s cake and have it later, which is always doomed to failure.

The spending habit is hard to curb. The gentle ratcheting up of interest rates that the MPC has so far imposed may not have been enough to do the trick. August will inevitably bring another quarter point and most commentators are expecting a further one, or two, increases before the end of the year. At that stage, those who mortgaged themselves heavily when rates were at their lowest will certainly be feeling the difference.

Whether that will result in a crash in house prices, rather than a gentle slowdown, will depend on the state of the rest of the economy. If employment remains high, then a crash may be avoided. But an increase in income tax, for instance, could make the sums very difficult for those who were leaving themselves little wriggle room. Once the election is out of the way, the Chancellor is likely to be looking for more funds from somewhere.

As yesterday’s figures showed, although he did not manage to borrow as much as he had intended last year, the Chancellor still notched up debts of £34 billion, enough to make even the most gung-ho house purchaser blanch.

Oiling the wheels for Crossrail

JUST how it is to be paid for is a matter yet to be decided, but London will have its Crossrail. The long-discussed project finally got the go-ahead yesterday and now, planners, protest groups and construction workers willing, it may actually be possible to travel on the new East-West train service across London as early as 2013.

Yes, that is a year after the Olympics might be held in London but those who have been pushing so hard for Crossrail are thinking long-term. They have managed to persuade Adrian Montague that, without Crossrail, London’s economy could be imperilled. Mr Montague, being one of the people that the Government, and in particular the Treasury, listens to, has been instrumental in winning support for the scheme.

Alistair Darling, Transport Secretary, knows that in pushing forward with Crossrail he is committing himself to a great deal of work for something for which he will never get the credit. Major transport schemes take so long to come to fruition that ministers who initiate them are long forgotten before there are any positive results to be seen from their efforts.

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