Some signs of the weakening economy
September 5, 2008
Most of us have heard rumours and speculation over whether the nation is on the brink of recession lately, and there is little doubt that the economy has taken a real battering of late. This has been worsened by the fact that interest rate cuts from the Bank of England have come to an abrupt halt as a result of soaring inflation levels, having been kept on hold since April of this year. Some industry official have said that the Bank of England has had no other choice but to hold interest rates steady, given that the rate of inflation has reached nearly double the government target of 2%, coming in at 3.8%. However, others have said that the decision spells disaster for the economy, which is already going through a marked slowdown.
Following the last MPC meeting earlier this month, when it was announced that interest rates would stay on hold, the BBC listed some of the signs of the weakening economy, which included house prices having plummeted for June compared to the same period last year, industry officials stating that global economic matters were affecting the permanent employment sector, and the British Chambers of Commerce warning of the increased risk of recession within a matter of months. Both service and manufacturing sectors have reported falling orders for several months.
Many industry officials have predicted that the credit squeeze is set to continue, and that this will make a negative impact on both consumer confidence and consumer finances, leading to continued economic slowdown for the remainder of this year and next year. Many officials have been calling on the Bank of England to continue cutting rates in order to tackle the economic slowdown, and following the last meeting one trade union official said:
“This was the wrong decision. The knock-on effects of the credit crunch and the rush of overly-gloomy headlines are already threatening an over-reaction and deeper down-turn than the actual economic news suggests.”
Most fully appreciate that the central bank and the Monetary Policy Committee members have a very difficult job in trying to balance the risk of rising inflation with the risk of the failing economy. One official said: “If the MPC reduces interest rates, it risks losing control of inflation. Conversely, if it increases interest rates it risks losing control of growth and could trigger a recession.”
One mortgage broker official said: “With the economic news from nearly all sectors of the economy getting worse by the day, a rate cut is badly needed to help restore some confidence to consumers and reduce the financial pressure on both them and industry.”
Another industry professional added: “If further gloom descends and the economic downturn gathers pace the Bank needs to be ready and willing to cut rates once again.”
If the economy continued to slide into decline, as some have predicted, many jobs could already be lost – many in the housing sector have already done, such as estate agency jobs and jobs at some of the major house builders.
Recent Additions:
- Landlords falling into serious arrears
- Problems with mortgages could go on for years to come
- Rise in repossession orders
- It could be a couple of years before mortgage freeze thaws out
- Inflation to get worse states Bank of England
- Central bank keeps base rate on hold again The Bank of England has announced that the base rate will be kept on hold for the third consecutive month following this week's Monetary Policy Committee meeting. The decision has come as no great surprise
- Increased stability for mortgage product numbers on market Since last summer when the global credit crunch swept across the UK the number of mortgage products available on the market has plummeted, with many lenders having to take a wide range of products off
- Low fee mortgages from Abbey for those with sizeable deposits Over recent months a number of lenders in the UK have increased the mortgage arrangement fees on their mortgage products, and this has seriously affected the ability of many people to afford to take out
- New service launched for consumers looking for mortgage advice In the current financial climate many people that are looking to take out a mortgage are also looking for quality financial advice from an experience, qualified, and trained industry officials to help them avoid making
- Mortgage approval levels plummet in one year Over recent months, since the onset of the global credit crunch, the number of mortgage approvals in the UK has been falling. Mortgage approval levels have been affected by a number of factors, and this
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