Prepare for the Recession: UK Mortgage Market to Shrink by 20% this Year
The UK mortgage market is expected to shrink by nearly 20% this year as the credit crunch continues to take its toll on lenders, according to a report.
Market analyst Datamonitor said the outlook for the UK lending market was bleak, with the ongoing problems caused by the credit crunch leading to fewer lenders operating, a shrinking number of products, higher prices and more consumers being refused credit.
The group predicts mortgage lending will fall by 19.3% during 2008, with total advances of £293.55 billion made during the year.
The figure is in stark contrast to growth of 19.7% recorded during 2006 when the market was booming, while advances rose by a further 5.4% in 2007 to peak at £363.8 billion.
Official lending figures from the Bank of England have been showing a steady decline in mortgage advances since the beginning of this year as the problems caused by the credit crunch intensified.
* The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund has said.
Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.
“The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come,” Prof Rogoff said at a conference in Singapore.
In an ominous warning, he added: “We’re not just going to see mid-sized banks go under in the next few months; we’re going to see a whopper; we’re going to see a big one — one of the big investment banks or big banks,” he said.
* The residential construction industry in Northern Ireland is facing “catastrophe” unless an agreement can be reached to urgently free up the flow of cash in the housing market. The warning came from Brendan Cunnane of the Construction and Property Group which represents a variety of firms within the sector from builders to estate agents.
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To compensate for the drop in stamp duty tax our glorious leaders will need to think of other ways to keep the wine cellars at Westminster fully stocked. Any bets on new environmental taxes?
As someone who works for a firm of mortgage advisers some of this is good news.
As the market contracts the ‘bad apples’ are being rooted out. Look at this list on the Financial Service Authority’s website
http://www.fsa.gov.uk/pages/Library/Communication/PR/2008/090.shtml
Much obliged baz, our indigenous people are certainly “under-represented” in the bad apple stakes here - Ed
to see that most of the banned advisers this year have been from the ethnic community. Fraud is endemic in their business practice.
The main problem we are having is that lenders have cut the products and tightened the criteria, but raised application fees to horrendous levels. I guess that the poor darlings have to make their profit from somewhere.
“In an ominous warning, he added: “We’re not just going to see mid-sized banks go under in the next few months; we’re going to see a whopper; we’re going to see a big one — one of the big investment banks or big banks,” he said.”
Rogoff also says that the financial sector is going to shrink. So it should, it is grotesquely parasitical.
It will be the task of our Party in power to re-focus away from speculation, money-lending and money-laundering towards manufacturing, energy production using our indigenous supplies, agriculture and fisheries.
The money out of money parasites won’t like it, but no doubt they will make the necessary adjustment to their mental furniture - whilst they have the opportunity to rearrange it for themselves.
Hey Ed, who is Baz? (he says smiling!)
Stringbag, we have seen a top bank go bust. It was the UK’s 5th largest lender and called Northern Rock. Taxpayer’s money rescued it.
Bradford & Bingley almost went under, and the HBOS group struggled to raise the money that it needed. However, in the latter case, the FSA are investigating possible insider dealing there. Men in suits chasing a bonus almost brought a bank down, but don’t expect any harsh punishment if found out.
As regards our financial system in general, the business guru Charles Handy pointed out in one of his books that shareholders don’t finance companies any more; they merely place bets on them - and the greedy parasites who run this racket (and their puppets in national and international politics) think that their system is good for our country. Yeah, right.
What I find really fascinating is that this current crisis doesn’t revolve around the equity markets, but around the debt markets instead. This must surely be a time-bomb of absolutely amazing proportions!
Incidentally, what kind of airheads would come up with the idea that it’s quite sensible to give mortgages to people with no realistic prospect of paying back the capital or the interest?! Post your answers on this page please.
Ed, you’ve changed my description of those nice people who dominate the finance and mortgage markets to ‘airheads’! They don’t deserve such polite terms!
- Ed
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I know, and I can think of other prefixes to ‘heads’, and we wouldn’t publish them either
Quote: “Men in suits chasing a bonus almost brought a bank down, but don’t expect any harsh punishment if found out”.
If any men in suits are attempted to be prosecuted then its the government or the FSA on a witch hunt, as the government was sitting back taking taxes and credit for a booming economy, The FSA couldn’t find its way out of a paper bag. These profit seekers are only doing what they are allowed within the confines of their employment contract. Bit like ordinary workers making more with overtime.
Governments have consistently been unable to strategically understand how markets operate and properly regulate them, short selling and a lot of these derivatives are nothing more than a sophisticated bookie shop which hides the true risk from punters.
If the Government wanted to properly run the economy then it would have included housing inflation into its calculations and had higher interest rates… Why? Because the true cost of living will always ripple through eventually, just the housing inflation has a longer lead time.
Economic cycles will always happen, the current one was overly extended beyond what was due, so the recoil is going to be larger or longer lasting.
My belief is that the government will drop interest rates, let the pound drop and just lie about inflation as best they can.
David Topple - “Incidentally, what kind of airheads would come up with the idea that it’s quite sensible to give mortgages to people with no realistic prospect of paying back the capital or the interest?!”
I’m not sure they should exactly be called “airheads”; they were cunning and unscrupulous enough to invent devious financial instruments of incredible complexity to pass the risk off whilst filling their pockets with giant wedges of cash. eg
“Edward Cahill, the banker in charge of collateralised debt obligations at Barclays Capital, resigned last week, and others in his department are understood to have departed. The best known is John-Paul Parker, who is credited as the inventor of “SIV-lite”, the controversial structured investment vehicles at the centre of the worries in financial markets.”
http://www.guardian.co.uk/business/2007/aug/31/money
Hang on though, Brown reckons all his troubles blew in from the United States. But Barclay’s Capital is under his supposed jurisdiction. Don’t say he’s lying! Surely not - a man of his “prudence” and “integrity” would never dream of telling porkies.
Recession? Oh no - what we are in for - indeed, the whole world - is a full-blown Depression that’ll make the 1930s look like a Buckingham Palace garden party.
Learn how the monetary system works, and what the true implications of the expression “Credit Crunch”.
For an animated film about the monetary system, it is remarkably entertaining - and extremely informative. All in layman’s terms:
http://throwawayyourtelescreen.wordpress.com/2007/05/30/money-as-debt/
Must admit though,
If people in high positions within corporates are pressured by shareholders to deliver increasing profits (Otherwise they get the boot) and their bonuses are determined by those profits AND the worst they can do by taking on infinite risk is actually just losing their job…. It is absolutely obvious they are going to go for it… passing the parcel (packaged financial instruments) until the music stops.
I can personally tell you that these financial arrangements are highly complex. Alchemy does exist with financial arrangements.
The more complex the arrangement, the more likely there is deception and siphoning of wealth.
And where is the impartial audit? Where is the disclosure to stockholders of the true risks…
This will happen again in another 10-15 years. (Just a cycle of new people who didn’t experience the previous cycle).
In the mid-1950s, a time when the voters were totally convinced that there were great distinctions to be made between what we know today as the Lib/LabCon trick, my late great father, whose perspicacity
placed him decades ahead of his time, said that all politicians, regardless of ostensible party affiliation, were “liars and parasites”.
He said to me, “The hungry 30s, when you were little and I was often out of work, having my dole money thrown at me across the counter by sneering bureaucrats, were terrible. We had bread and dripping and a cold, empty fireplace because we couldn’t afford coal.
“But they were nothing compared with the catastrophe to come. Even gold will be worthless because you can’t eat it. A loaf of bread will be worth more than a whole showroom full of Rolls Royces. When it is over and a group of survivors are building their round-houses before the winter sets in, some man will appear, wearing a pin-stripe suit, a bowler hat, shiny shoes, and carrying a briefcase and an umbrella. When he points with his umbrella to a corner of the site and haughtily says, ‘I’ll have mine over there’, it will be every man’s duty to pick up his spade and split the b*****d down the middle”.
Dad, had extraordinary foresight. Were he alive today, he would have recognised the initial stages of his awful prediction. Needless to say, he would have been a member of the BNP. In his stead, I have that honour.
Tommy -”Alchemy does exist with financial arrangements”
It doesn’t really though because the alchemists can no more turn base metal into gold than medieval quacks could; it’s a sophisticated way of putting lipstick on a pig.
“This will happen again in another 10-15 years. (Just a cycle of new people who didn’t experience the previous cycle).”
Depends on the degree of choas the alchemists have caused. After precipitating the Great Depression and WW2 they were kept under tight control, only really slipping free under Thatcher and Reagan.
The forthcoming BNP government must sort out these exotic financial instruments and their purveyors - these “derivatives”, “structured investment vehicles”, “collateralised debt obligations” and “credit default swaps”; usually quite incomprehensible to those charged with selling, and indeed overseeing them.
And our government must sort out the deregulated structures that allowed these financial concoctions to see the light of day - the fractional reserve banking that creates money out of thin air; the company structures which enable profits to be privatised, losses to be socialised and executives to escape misconduct scot-free; and the trusts which own but somehow don’t own financial assets like Northern Rock’s “Granite” securitisation vehicle.
“Tommy- “If the Government wanted to properly run the economy then it would have included housing inflation into its calculations and had higher interest rates… Why?”
With Brown’s “vibrant” economic “miracle” critically dependant upon housing equity withdrawal(to blow on foreign consumer imports etc) it is absolutely no suprise whatsover that the inflation measure he selected in 97 doesn’t take into account housing costs. This is primary evidence for the prosecution that we will bring against him in due course.
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See here - Ed