Lending up 7% in October

Latest CML data has revealed that gross mortgage lending totalled an estimated £18.7 billion in October, almost 7% higher than September’s £17.5 billion figure.

The monthly total was 44% lower than gross mortgage lending of £33.4 billion in October 2007.

CML director general Michael Coogan said: “While lending in October ticked up from a low figure in the preceding month, the outlook is one of continuing weakness for housing and mortgage markets in the coming months, despite the Bank rate cuts in October and November.

“Consumer confidence is now being affected by the worsening economic outlook. However, any recovery in lending is also being held back by the continuing shortage of mortgage funding. The government should therefore publish the delayed Crosby review as part of the forthcoming pre-Budget report and announce concrete steps that will enable and encourage firms to increase mortgage loans.”


Largest quarterly fall in Scotland for 16 years

Scottish house prices fell in the latest quarter, according to the latest Scottish House Price Monitor from Lloyds TSB Scotland.

In the three months to 31 October, the quarterly price index for the average domestic property in Scotland fell by 4% to give an average mix adjusted Scottish house price of £165,398. This is the largest quarterly fall in the 16-year history of the House Price Monitor.

On an annual basis, Scottish house prices have still risen by 4.9%, but this figure is significantly down on the 9.3% reported in the previous edition of the House Price Monitor.

The number of house purchase transactions within the Scottish House Price Monitor has fallen by 43% on the same period last year.

The market is becoming more differentiated with Glasgow reporting a quarterly rise while Edinburgh, Dundee and Aberdeen all show falls in the quarter. Outside the main cities, the South East excluding Edinburgh reports a modest quarterly rise while the other areas are all showing quarterly falls.

Turning to property types, flats continue to show the most robust performance, with a quarterly fall of 1.1% and an underlying annual increase of 4.7%. The sales of these lower priced properties continue to hold up well and offer some explanation for the quarterly rise in Glasgow prices. Prices of detached houses fell by 5.6% in the quarter while prices of semi-detached properties fell by 3.5%.

Professor Donald MacRae, chief economist, Lloyds TSB Scotland, said: “The Scottish economy is entering a significant slowdown with rising claimant unemployment and falling consumer confidence. The number of housing transactions has declined markedly since one year ago and the market is adjusting to lower prices and sales.

“Although the number of mortgage products has declined, the cost of borrowing has reduced for many mortgage holders with the latest fall in interest rates in early November. So far, the Scottish housing market is showing sensible adjustment rather than a precipitous collapse.

LibDems fear 0% interest rates

After the Bank of England predicted yesterday that inflation could fall below 1% next year, the Liberal Democrats fear that we could be heading for zero interest rates, coupled with rising unemployment.

Liberal Democrat Shadow Chancellor, Vince Cable said: “It’s clear from the today’s figures that we’re heading for very high levels of unemployment with falling inflation. This could soon become negative inflation, with prices actually falling.

“The Governor of the Bank of England is right to say that interest rates will fall a lot further. We may find ourselves in a world of zero interest rates before too long.

“The actions we have urged, including drastic interest rate and tax cuts, now attract wide political support. However, the key problem is that despite the Government’s recapitalisation of the banks, the financial system is still completely gummed up.

“Ministers must consider more drastic action to ensure that credit flows on reasonable terms to solvent borrowers.”

AMI paints a bleak remortgage picture

Remortgage business could diminish further in 2009 as borrowers are forced to stay on their lenders’ SVRs until LTVs come down, the Association of Mortgage Intermediaries warns.

AMI’s latest Quarterly economic bulletin says brokers may find borrowers impossible to place with lenders until LTVs come down.

It says: “This means less business for brokers who will find these borrowers untouchable by other lenders until they are out of negative equity.”

AMI says that although the multibillion pound government recapitalisation and bank nationalisation plans were necessary, they won’t be sufficient to allow borrowing between banks and lending to corporate and retail customers to begin again.

More worryingly, it says that demand for credit has now ebbed away so the prospect of improved supply is immaterial.

It has also scrapped its previous predictions of £55bn of net lending in 2008 and reduced it to between £38bn and £43bn.

The International Monetary Fund echoes AMI’s outlook and warns that the UK faces its most severe economic downturn since the recession in the early 1990s.

In its latest biannual World economic outlook report, the IMF predicts the UK will be the worst hit of the world’s leading economies due to ongoing financial turmoil and falling house prices.

Men saving cash by staying single

Almost half of all Britain’s single men admit that the key to saving money is staying relationship-free. In fact, latest research from Skipton indicates that 90% said they’d avoid romantic commitments altogether because of the economic downturn.

Additional research conducted by YouGov asked more than 2,400 British adults what effect being in a relationship had on their finances.

Nearly half (47%) of all single men surveyed admitted that they would spend more money than they currently do if they were to enter into a relationship.

Out of those surveyed, two-fifths of those in a relationship claimed to researchers that their partner was a spender rather than a saver; this rose to nearly half (49%) in the South East.

Jason Clarke, head of PR at Skipton Building Society, said: “We’re noting a real view amongst men that the single life is the cheaper life! In these results men certainly take the view that having a partner comes at a financial cost. So perhaps single girls should be avoiding bars and heading for the building society to meet an eligible bachelor!”

16% of men in Wales admitted to saving more than they spend, compared to the West Midlands, which came out bottom at just 9%.

However, 71% of women questioned confessed they still spent more on non-essentials than they saved, despite the gloomy financial climate.

When asked which family member they thought they had inherited their spending patterns from, nearly 30% of women said it was their mother…

Bank of England slashes interest rates by 1.5%

The Bank of England has slashed interest rates by a further 1.5% to boost Britain’s ailing economy. Following an emergency 0.5% cut in October, the Bank’s Monetary Policy Committee (MPC) has taken drastic action again as its focus switches from inflation to recession.

Britain’s basic rate of interest now stands at 3%, but it is unclear how much impact this will have for households and businesses.

The Council of Mortgage Lenders (CML) has already said its members are unlikely to pass on the rate cut to borrowers.

In a statement issued last night, the CML said: “It is important to allow for the fact that in the post-credit crunch environment, where Government and regulators expect lenders to operate lower-risk and higher-capital lending businesses, the pricing of mortgages relative to benchmark rates is highly unlikely to return to the very narrow margins of the pre-crunch era.

“And lenders will need to take account of the possibility of higher provisioning and losses in an environment of higher arrears and possessions. A decision not to follow a base rate reduction does not imply that the lender is ‘profiteering’.”

Further cuts are expected in the coming months, and some economists believe the MPC may reduce rate as low as 0% to try and stimulate the economy and reduce the effects of recession.

Isle of Man hits back at Darling in ‘tax haven’ row

The Isle of Man has expressed its “surprise” after Alistair Darling promised to take a “long hard look” at the crown dependency’s status as a tax haven. It says rather than being a refuge for those wishing to avoid paying UK tax, it has looked to provide just regulation and a competitive commercial environment, as well as play its part in the fight against money laundering and tax evasion.

Isle of Man Finance director John Spellman adds it hopes Darling’s remarks do not deflect the UK Government from representing the Isle of Man in its negotiations with Icleand to ensure Kaupthing depositors get their money back.

Chancellor Darling told the Treasury Select Committee yesterday the Government would review its relationship with the offshore tax haven in the wake of the Icelandic banking crisis.

“I actually think when we look at what has happened over the last few months we really do need a long, hard look at the relationship between this country and the Isle of Man tax haven sitting in the Irish Sea,” Darling said.

But Spellman says: “We, in the Isle of Man, are very surprised by the comments made by Alistair Darling.

“Rather than being a “tax haven” we have actively sought to provide sound regulation, a competitive commercial environment but also play our part in the international fight against money laundering, terrorism and tax evasion.

“We have a good relationship with the UK and are a major contributor, via the City of London, to their economy.”

Spellman adds the Isle of Man has recently signed a Tax Information Exchange Agreement with the UK as proof of its commitment to working with Gordon Brown’s Government.

“The Isle of Man actually leads the way internationally on actively signing such agreements,” he says.

Darling told the Treasury Select Committee: “We can’t have a situation where all sorts of tax advantages accruing to the Isle of Man but when things go wrong people say what about the British compensation scheme?”