Market commentary
Market Commentary is our monthly analysis on the UK mortgage markets, released on the same day as our gross advances press release. Below is a listing of our most recent commentarys.
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18 September 2008
Financial markets are experiencing momentous events. Whereas in the US the authorities have intervened decisively and directly in rescuing institutions, in the UK the private sector has grappled to find solutions. The problem of a lack of available funding remains. While the extension of the Special Liquidity Scheme offers a brief respite, and should help tide firms over a potentially difficult year-end period, the lack of funding coming into the system remains the vital issue for the authorities to address.
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20 August 2008
As Mervyn King pointed out, the housing and mortgage markets are going through an adjustment process. The question is how far the authorities will leave the correction to market forces and whether they will look to step in at a time when the wider economy is at risk of recession. The Governor has made clear his objection to any long-term assistance with funding. The interim Crosby review highlighted a number of possible courses of action, including leaving the markets to adjust without intervention. After the mixed signals given out by the government over a possible stamp duty holiday, we hope that the authorities will act soon with timely, well targetted and decisive measures.
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18 July 2008
There have been one or two positive signs in the funding markets in the last month. Market interest rates have fallen, and lenders have been able to cut some fixed mortgage rates in response. Providing the recent spike in inflation does not spark large pay rises, the Bank of England could well cut rates quite quickly next year. Demand for mortgage credit has fallen off, as expected. This is part of the adjustment process that will lead to supply and demand moving back into better balance. The authorities have an important role to play in ensuring that the adjustment is not unnecesarily severe.
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19 June 2008
News coming out of the housing and mortgage markets remains downbeat, but very much as expected. There will not be much change in the coming few months. But, providing the authorities manage to free up the credit markets, we anticipate an improvement later in the year. At the same time, the Bank of England finds itself under pressure as global events cause inflation to rise, and economic growth to slow.
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21 May 2008
The Bank of England's special liquidity scheme is hopefully a first step on the road to freeing up the money markets. However, it is yet to have a significant impact and could take some time to do so. The Bank has little room for manoeuvre on interest rates, being caught between a slowing economy and inflation rising above target. After a difficult next few months, we forecast a pick up in housing and mortgage market activity towards the end of the year as conditions ease in the money markets and the impact of earlier interest rate cuts feed through.
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18 April 2008
This month's cut in Bank rate has not been reflected in wholesale money rates and so has only benefited some mortgage borrowers. The shortage of mortgage funding remains a serious problem. It is holding back transactions and weakening prices. In the CML's view, the tripartite authorities should use unconventional measures to address the glut of illiquid assets constraining the ability of lenders to make new loans. The solution the Bank is rumoured to be working on looks promising, although it is difficult to assess until more detail emerges.
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20 March 2008
After a more settled start to the year, the credit crunch has entered a new phase. For UK mortgage lenders, this means continuing pressures on the availability and cost of funding, which is being reflected in a further tightening in lending terms and some upward pressure on mortgage rates. The extent to which the adjustment in financial markets will spill over to affect other sectors of the economy is unknown. The Chancellor’s Budget forecasts suggests this will be moderate, with economic growth slowing to around 2% this year from 3% in 2007.
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20 February 2008
The economic background looks more problematic than at any time in the last ten years. The economy has been hit by a negative shock to output, while at the same time being hit by a number of negative shocks to inflation.
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