interesting news

No banks have collapsed for more than a month and interest rates look set to come down next Thursday - so are much-needed cheaper mortgages just around the corner? Sadly not.

A few fixed-rate deals came down in response to the most recent 0.5 point base-rate cut, but trackers - the mortgages of choice during times of falling interest rates - are more expensive than they were this time last year, when the Bank of England base rate was 1.25 percentage points higher than the current rate, of 4.5 per cent.

In October 2007 the average rate on a tracker mortgage stood at 6.23 per cent, compared with 6.27 now, according to Moneyfacts.co.uk, the comparison website. Michelle Slade, one of its analysts, says: “Lenders are just not passing on cuts. [They] are factoring in a much bigger margin for risk than ever before and as a result mortgage rates remain high.”

The last time that the base rate was 4.5percent, borrowers could have obtained a rate of 4.25 per cent on a two-year tracker. Today the best rate on offer is 5.99percent. More than 30per cent of applications for loans worth more than 75percent are being declined by LloydsTSB, often because small details, such as a home phone number, have not been filled out. Such is the paranoia of banks.

Restrictions are becoming harsher still. Cheltenham&Gloucester has introduced a new fee for borrowers who want to move and rent out their homes by converting their mortgage into a buy-to-let loan. The wait for respite continues. Source: times

The Bank of England failed to respond to warning signs of a looming recession and had been wrong to delay cutting interest rates until too late to stop growth contracting and unemployment rising sharply, a member of the Bank's monetary policy committee (MPC) said last night.

Speaking as the US Federal Reserve cut interest rates to just 1% in an attempt to halt a slump in activity, David Blanchflower launched an outspoken attack on his eight MPC colleagues, saying the Bank had been too optimistic about the UK's ability to survive the global crisis, and Britain would now endure 18 months of falling output as it felt the full impact.

The Bank is expected to follow the Fed's lead by cutting at least half a percentage point off UK rates next week, although some analysts want a one point cut after news the economy shrank by 0.5% in the third quarter of this year.

Blanchflower's intervention came as David Cameron attempted to pile the pressure on Gordon Brown when the Tory leader challenged the prime minister to admit that his fiscal rules were now dead and he was planning a "spending splurge".In their most bruising encounter in the crisis, Brown hit back at prime minister's questions by accusing the Tories of mixed messages, saying in one breath that it was right to increase borrowing in a recession and saying in another that it was not.

Cameron asked of the fiscal rules: "Why will he not now admit that they are dead? Let us just remember them - he used to be so proud of them. Rule one was: 'Only borrow to invest'; now he is having to borrow to pay for unemployment benefit. That rule is dead. Rule two was: 'Don't have debt over 40% of national income.' Even on his own fiddled figures, that rule is now dead. Why will he not admit that the rules failed to deliver responsibility in the good years and that, as soon as the bad times came, they collapsed completely?"

In a speech last night, chancellor Alistair Darling said it would be "perverse" to stick rigidly to the rules during a downturn.

Blanchflower was a lone voice on the MPC calling for cuts in interest rates this summer. Speaking in Canterbury last night he criticised fellow MPC members for ignoring his warnings. "I believe the trend has been apparent for some time. The synchronised downturn in so many surveys should have led us to realise sooner that the UK economy was entering a recession," he said.

"If rates are not cut aggressively [when the MPC meets next week] we do face the prospect of a relatively deep and long-lasting recession."

In his speech, he said tighter credit conditions imposed by banks had yet to be fully felt. Policymakers faced an "unusually severe" international financial problem, possibly more significant than 1929, a crash which principally involved bank failures in the US. "The current difficulties in financial markets are more comparable to what happened in world war one, when stock exchanges in several countries closed for extended periods."

The MPC had been reluctant to cut rates during the summer as inflation rose to a 16-year-high of 5.2% in September.

Blanchflower said the MPC had over-reacted to the threat of higher imported oil and food prices repeating the 1970s inflationary spiral. But workers' bargaining power was weaker now, with little chance that they could push up wages in response to rising prices.

"In its last health check on the economy, released in August, the Bank said it expected output to be flat over the coming year, with employment falling a little. Output growth was expected to recover in 2009 as energy prices fell, the credit crunch eased and a weaker pound helped exports. This was an optimistic view," Blanchflower said. "Clearly output is now beginning to contract, but I think this likelihood was apparent in August."

He added that at last month's MPC meeting some had argued for higher borrowing costs. "I was alone in voting for an immediate cut of half a percentage point. I am concerned about the detrimental effect of recent events in financial markets on the UK economy," he said, adding that the 0.5% drop in GDP had occurred mainly before this autumn's market meltdown.  Source: The Guardian

The figure equates to the net wealth of all British households, companies and official bodies even after taking the country's enormous debts into account.

Net assets rose by a record £506bn in 2007, an 8% increase on the year before, according to the ONS.

Despite debts of £1.7trillion, this still means each UK household was worth £300,000 and each individual worth £125,000, on average.

The fall in the stock markets and the slump in property prices will have wiped out around £1trillion of the total.

Housing continued to be the country's most valuable asset, worth over £4trillion, around 60% of net worth and up 10% on the previous year.

Stocks, shares, bank accounts and pension plans form a much larger gross asset, worth almost £26trillion, but are more than outweighed by the nation's debts, leaving a net negative contribution of £380bn. Other net assets include offices, factories, vehicles, public non-financial corporations and local government.

Offices and factories and the national fleet of cars, lorries, aircraft and ships make up most of the rest of the national wealth.

When the figures are broken down by ownership, householders come out on top

Despite Britons' notorious appetite for debt, they still have a net worth of $4trillion after £1.5trillion of mortgages and debts have been accounted for. Non-profit institutions such as charities, universities, churches and trade unions accounted for most of the remaining positive net worth.

The biggest liabilities were private non-financial corporations (-£546bn), financial corporations (-£393bn) and central government, which is £202bn in the red.
Source: telegraph

The number of new mortgages edged up slightly in September from the previous month’s record low but at 33,000 home loans, the volume remains well below the average of the previous six months.

Consumer lending data from the Bank of England, released on Wednesday, show that overall, net lending secured on homes – new and re-mortgages – was £2.2bn. However, net lending in August – the value of loans extended minus repayments of principal received – was revised downward from the £0.1bn rise previously reported and was actually a net negative at -£0.1bn.


Howard Archer, economist at Global Insight, noted it was the first ever month of negative net mortgage lending since the Bank’s series began in 1993.

That total number of mortgages outstanding in the UK could actually shrink is illustrative of the extent to which credit is being restricted in the economy. Falling house prices are deterring new buyers from entering the market because they believe more bargains will emerge later while lenders are becoming more risk averse and demanding larger down-payments..

“Despite the very limited improvement from August, the Bank of England mortgage data for September still showed that housing market activity continued to be decimated by the highly damaging combination of stretched buyer affordability and tight lending practices,” Mr Archer said.

He suggested that the latest lending data, combined with evidence of a deepening economic downturn, will reinforce pressure on the Bank’s Monetary Policy Committee to cut rates by half a percentage point to 4.0 per cent when it meets next week.

Re-mortgaging levels in September also edged up slightly to 72,000, but remained below the 82,000 average level of the previous six months. Total loans backed by homes as collateral were 143,000 in September. They had averaged 169,000 over the previous six months.

Meanwhile, the Building Societies Association (BSA) said net mortgage lending by its members has turned positive again, rising to £314 in September from -£37m in august, but remains 47 per cent below lending levels in the year ago period.

Adrian Coles, director general of the BSA, said: “With the housing market depressed as house prices continue falling and with confidence amongst potential homebuyers low, it is no surprise that mortgage lending is down on last year.” He added that mortgage lending is unlikely to recover “for some time.”
Source: The Financial Times

Prime Minister Gordon Brown said he is ready to increase spending and borrowing to shore up the U.K. economy as it falls into its first recession in 17 years.

The government needs to maintain investment in job-creating public works as part of a ``comprehensive'' effort to counter the slump that includes the 50 billion-pound ($79 billion) bank- rescue plan and Bank of England interest-rate cuts, he said.

``The responsible course of action is more borrowing for the investment that is necessary both now and for the longer term,'' Brown told an audience of economists and businessmen in London today. He said borrowing will fall as a share national income when the economy recovers and generates more tax receipts.

The comments indicate he and Chancellor of the Exchequer Alistair Darling are preparing to abandon a decade-old pledge to limit debt to 40 percent of gross domestic product. Brown last week acknowledged that Britain is tipping into a recession after the economy shrank in the third quarter at the fastest pace since 1990.

Darling may use his Mais lecture on Oct. 29 to formally scrap the fiscal rules that Brown introduced in 1997 when the Labour Party came to power, The Financial Times reported today.
 

He is planning to replace them with new targets for cutting borrowing once the economy is on a stronger footing, and will announce the new fiscal regime in his pre-budget report this year, the newspaper reported, without saying where it got the information.

Public Works

The government last week pledged to bring forward projects scheduled for after 2010 to spur the U.K. economy, which contracted 0.5 percent from the second quarter as the financial crisis ravaged industries from banking to construction.

Debt was 37.9 percent of GDP in September, compared with 36.2 percent a year earlier. Including the liabilities at Northern Rock Plc, the mortgage lender that was nationalized in February, it was already above the ceiling, at 43.4 percent.

Debt may rise to 50 percent of national income when the recent nationalization of Bradford & Bingley Plc and the pledge to buy stakes in cash-strapped banks are taken into account, according to the Institute for Fiscal Studies.

``You maintain the high levels of investment that you've got to prepare for the future,'' Brown said. ``You help people fairly through difficult times, and that means that your fiscal policy must support your monetary policy. There is no one measure; there is a comprehensive set of measures that are going to take us through these difficult times.''

`Out of Necessity'

The Conservative opposition says Brown spent too much when the economy was growing during his decade as finance minister.

``What they're talking about is borrowing out of necessity, not out of virtue,'' George Osborne, Conservative economic spokesman, said today on BBC Radio 4. ``The problem here is that the borrowing situation is very, very much worse because we enter into this recession with very weak public finances. That's not a deliberate plan; that is what economic circumstances dictate.''

Britain had its biggest budget deficit since 1946 in the six months through September as tax receipts stagnated, and economists say the shortfall may reach 7 percent of gross domestic product over the next two years, more than double the 3 percent European Union limit.

A group of economists wrote to The Sunday Telegraph newspaper yesterday, warning against further government spending as a way of stimulating the economy.

Insofar as slowdowns ``are to be managed at all, the best tools are monetary and not fiscal ones,'' the 14 economists wrote. The focus on public projects and higher spending is ``misguided.''
source: bloomberg

Despite the fact that the Spanish property market is really suffering a drought in terms of buyer activity at the moment, don’t be fooled for a second into thinking that we Brits have fallen out of love with Spain.  For one thing, there has to be more to Spain than its property market to have attracted something in the region of 760,000 Brits to relocate there.

The allure of Spain is far more than the weather as well, and it’s an evergreen destination – i.e., no matter how many slings and arrows of outrageous fortune fall on Spain, we cannot help loving it enough to holiday there and relocate there.

In this article we’ll look at why living in Spain is still so popular, and we’ll explore all the reasons why you too might like to think about a relocation, either now or perhaps in your retirement.

Spain has it all – i.e., all regions of the nation are accessible from all parts of the UK and usually for a fair price.  Not only that, but the climate is fantastic with Spain averaging 137 days of sunshine compared to just the 52 that we have each year in the UK.  The culture is rich and diverse in Spain, the cuisine is thoroughly appealing, the wine is delicious, the history of the nation is fascinating, and then to cap it all off, the scenery in Spain is breathtakingly magnificent.  How many more reasons does one need to think that actually, living in Spain might just be ideal and idyllic?

If you’re not yet convinced however, consider the fact that the nation is also vast, and because of Spain’s landmass you have such diversity, therefore there is a part of Spain that appeals to each and every one of us.  For those who prefer a more temperate climate, Northern Spain is cooler for example, and for those who want as much sunshine as possible, the Costas are ideal.  Alternatively, if you’re a winter sports enthusiast or a lover of the great outdoors, what about the Pyrenees or the Sierra Nevada, and if you prefer island living then there are the Spanish Balearic and Canary Islands of course.  And there is even a property type and a property price for everyone nowadays.

Because sales volumes have dropped by an average of 27% across the entire nation, many developers and private vendors are slashing the prices of their properties to guarantee a sale.  As the underlying appeal of Spain has not been damaged by the falling property prices, many Britons are taking advantage of the fact that you can now finally find truly good value for money in the Spanish real estate marketplace.  If you’re seriously contemplating a move, then haggle hard when you find the property of your dreams – because as a buyer you’re best placed to be the one doing the negotiating.  In fact, it could be that there has never been a better time to buy in!

And finally, the lifestyle that relocating Britons find in Spain could not be further removed from what we are used to in the UK.  For example, there is far more emphasis on the family and on relaxing and enjoying life in Spain than there is in the UK.  Brits quickly adapt to this change in culture and realise what they have been missing out on by constantly being on the go in the UK and living to work rather than just working enough to live.  Generally speaking one can expect this positive change on ones life to result in an enhanced feeling of well-being, and sooner rather than later your old friends and your family back in the UK will see this positive change in you and themselves begin thinking about whether living in Spain could be just the ticket for them too!

There is so much in Spain’s favour that we Brits cannot do anything about the love and passion we feel for this nation.  It appeals to us on all levels, and now that Spanish house prices are falling and it is therefore becoming easier to buy in to the inimitably enjoyable and good lifestyle that Spain offers, so those Brits already living the dream in Spain can soon expect to be joined by a whole host of new British neighbours! 
source: shelteroffshore