The list of companies forced into administration or going to the government with a begging bowl continues.

Today it has been announced in the news Jaguar and Landrover have gone to the government for a bailout to save its 15,000 jobs.

At the same time Savills, the upmarket estate agent, has give a sever profit warning.

Royal Worcester has been forced into administration.

Yesterday the fate of Woolworth’s was decided with an announcement that the high street giant would be closing the doors of its stores by the 5th of January.

Unfortunately this is likely to continue with more institutional companies closing their doors over the coming months.

Cheers,

BB

Figures released today show that amount of people claiming benefit in the UK has risen beyond 1 million.

The total number now on state benefits is 1,072,000 and is the highest since 2001. This is particularly worrying because unemployment usually occurs a significantly longer time after a country enters recession. This in turn indicates that the recession could be much more sever and longer lasting than experts had previously been forecasting.

*GROAN*

The recession continues to be strengthened by poor decision making by the Bank of England.

The 1% rate cut announced in early December was actually almost a more significant cut. The minutes show that many in the committee felt a larger cut maybe necessary to slow the recession down. In the end a 1% cut was settled on and when the minutes of the meeting were made public (yesterday according my sources) the pound fell sharply against the Euro.

At the same time rate setters in the US cut th interest rate down to 0% in a much more decisive move.

Gordon Brown won international acclaim for his bank bailout strategy, however since that point to me it seems that the international community has been less than positive about the UK’s handling of economic strategy.

Cheers,

BB

The economy is shrinking at a speed not seen since the 1980’s crash.

It appears that we are fast approaching a DEPRESSION rather than a RECESSION.

A depression is a sustained period of reduced GDP a recession is a reduction in a countries GDP.

For the most part this is due to reduced spending caused by low consumer confidence and the lack of availablity of credit to fund spending.

The government has tried to remedy this by increasing government spending and by lending the banks money.

However with the banks still not increasing their lending and the interest rates still not being passed on to the customers by the banks the governments efforts so far have had a negliable effect.

Over the month of December we are not likely to see any improvement.

We need to look to January for a recovery.

Merry Chrtistmas

BB

More info on the shrinking of the UK ecomomy can be found below.

UK economy shrinks by 1% in 12 weeks

The UK economy shrank by 1% in the three months to November as the pace of the downturn quickened, a leading think-tank warned today.

The National Institute of Economic and Social Research (NIESR) said “there was every reason to believe” the figure would be worse for the last three months of the year.

In a further sign of the deepening economic woe gripping the country, the organisation also revised its output contraction for the three months to October to 0.8%, from 0.5%.

The figures “make clear that the rate of output decline is accelerating”, NIESR said.

Latest official UK data showed the economy shrank 0.5% between July and September — the first contraction for 16 years.

Initial estimates for how output during the three months to December has fared are due out from the Office for National Statistics (ONS) next month, but they are widely expected to show that the UK is officially in recession.

NIESR — which is one of Britain’s largest independent economic research bodies — said the reduced availability of bank lending was the main problem for policymakers to address.

It said: “The Government faces the real risk that, despite the measures it took in last month’s Pre-Budget Report, output will fall more sharply than it expected to the end of next year.

“The main problem it needs to address very urgently is the availability of bank credit.”

The Bank of England has slashed interest rates by 2.5% in two months in the battle to stave off a deep UK recession.

The Government has also provided billions of pounds of funding to the UK’s banking sector to boost lending to homebuyers and small businesses.

It is being paid for by increased Government borrowing. The Chancellor, Alistair Darling, was due today to face a grilling from MPs over his plans.

The NIESR report follows data from the ONS which showed that UK manufacturing’s biggest slump in almost 30 years had deepened.

The ONS said that in October, output had fallen more heavily than expected, by 1.4%.

The dire performance represents the eighth successive month of decline in the worst run since 1980.

This leaves annual output 4.9% down after September’s figures were also revised lower.

Overall industrial production, which also includes the mining and utility sectors, fell 1.7% between September and October, at the peak of the crisis in the banking sector.

Paul Dales, of Capital Economics, said “activity all but fell off a cliff” at the start of the final quarter of 2008.

Ok,

So lets pick appart the new mortgage scheme announced by Gordon Brown.

1) None of the baks have given agreement whatsoever. They have meerly agreed in principle.

With further investigation it looks very much like Grodon rushed in to this new ’scheme’. Not only did Labour rush into the planning of the scheme but also announced it before the details were actually finalised by all parties. Will this scheme ever materialise and if it does exactly what form will it be in - time will tell.

2) Borrowers with a second charge on their property will not qualify for the scheme.

People with a second charge on their property usually relates to a loan of somekind. This is likely to be in one of two main forms - secured loans or bank guarantees. People who have taken out a secured loan are more likely to need the help than those who haven’t ( VERY GENERAL comment ) and I fail to see why they should not be included ion the scheme - are they not as much at risk?

3) The subprime lenders have not joined and look very unliely to do so.

This is the most distressing of all points. The sector of the British mortgage market at most risk of repossesions during the credit crunch is the subprime market.

This is for two reasons

i) Their mortgages repayments are much more expensive
ii) When their fixed rate deals ( or other forms of mortgage introduction rates ) end they will be forced either to stay on the standard variable rate or to take potentially even more expensive mortgages ( due to the lack of cheap mortgages available in the British mortgage market today ).

Conclusion

If something looks too good to be true it usally is! In my opinion this new scheme is simply a very impressive piece of spin doctoring. This scheme is unliely to actually help many homeowners at all and is likely to have a very small effect on the numbers of repossesions likely to be observed during the coming months.

For more detailed information please read the article below from

www.timesonline.co.uk

Mortgage scheme rules likely to limit householders’ help

Homeowners hoping to avoid repossession under the Government’s “mortgage holiday” proposals must meet a series of qualifying criteria that could mean fewer than 10,000 are likely to join the scheme.

The Homeowner Mortgage Support Scheme, which was announced last week by Gordon Brown, offers households that suffer a “significant and temporary loss of income” as a result of the recession the chance to defer a proportion of the interest payments on their mortgage for up to two years.

Yesterday the Treasury said that the scheme would be open only to households with a mortgage of less than £400,000, estimated to be about ten million borrowers.

About 1.7 million households will not qualify, including borrowers with a second charge against their home and those with a buy-to-let deal.

Borrowers who apply can also hold no more than £16,000 in savings and will need to already be in arrears on their monthly payments. It was also revealed that borrowers would be required to speak to a debt adviser, such as National Debtline or Citizens Advice, before approaching their lender.

Debt charities will be expected to assess whether a homeowner qualifies and to establish whether they will be able to begin repaying the debt in the near future. However, the final decision will rest with the lender.

The Chancellor announced an extra £15 million for debt charities in the Pre-Budget Report. Approximately £5 million is going to the Money Advice Trust, which runs the National Debtline. It will be recruiting another 50 debt advisers next month.

Last night it emerged that the UK’s eight biggest lenders, including HBOS — owner of Halifax — Abbey and HSBC had not offered concrete assurances that they would sign up to the scheme.

The lenders have agreed only “in principle” to the idea but are expected to come under further pressure at a meeting with ministers due today.

It is also estimated that sub-prime lenders, who are considered to be responsible for approximately half of all repossessions, will not join the scheme.

Last week Margaret Beckett, the Housing Minister, suggested that about 9,000 borrowers will take advantage of the scheme, despite estimates from the Council of Mortgage Lenders (CML), the trade body, that repossessions could top 75,000 next year.

There will be 200,000 households who are more than three months in arrears by the end of the year, according to the CML.

The Government is guaranteeing any loss experienced by lenders in the event that homeowners are not able to repay the interest that has been rolled forward.

Officials said that the Government’s liabilities if people defaulted en masse could be £1 billion. However, the Treasury estimates that the more likely cost will be about £100 million.

Currently, overstretched borrowers with mortgages below £200,000 have their interest payments covered for two years if they are on benefits under the Income Support for Mortgage Interest scheme.

Ok,

So lets pick appart the new mortgage scheme announced by Gordon Brown.

1) None of the baks have given agreement whatsoever. They have meerly agreed in principle.

With further investigation it looks very much like Grodon rushed in to this new ’scheme’. Not only did Labour rush into the planning of the scheme but also announced it before the details were actually finalised by all parties. Will this scheme ever materialise and if it does exactly what form will it be in - time will tell.

2) Borrowers with a second charge on their property will not qualify for the scheme.

People with a second charge on their property usually relates to a loan of somekind. This is likely to be in one of two main forms - secured loans or bank guarantees. People who have taken out a secured loan are more likely to need the help than those who haven’t ( VERY GENERAL comment ) and I fail to see why they should not be included ion the scheme - are they not as much at risk?

3) The subprime lenders have not joined and look very unliely to do so.

This is the most distressing of all points. The sector of the British mortgage market at most risk of repossesions during the credit crunch is the subprime market.

This is for two reasons

i) Their mortgages repayments are much more expensive
ii) When their fixed rate deals ( or other forms of mortgage introduction rates ) end they will be forced either to stay on the standard variable rate or to take potentially even more expensive mortgages ( due to the lack of cheap mortgages available in the British mortgage market today ).

Conclusion

If something looks too good to be true it usally is! In my opinion this new scheme is simply a very impressive piece of spin doctoring. This scheme is unliely to actually help many homeowners at all and is likely to have a very small effect on the numbers of repossesions likely to be observed during the coming months.

For more detailed information please read the article below from

href="https://www.timesonline.co.uk">www.timesonline.co.uk

Mortgage scheme rules likely to limit householders’ help

Homeowners hoping to avoid repossession under the Government’s “mortgage holiday” proposals must meet a series of qualifying criteria that could mean fewer than 10,000 are likely to join the scheme.

The Homeowner Mortgage Support Scheme, which was announced last week by Gordon Brown, offers households that suffer a “significant and temporary loss of income” as a result of the recession the chance to defer a proportion of the interest payments on their mortgage for up to two years.

Yesterday the Treasury said that the scheme would be open only to households with a mortgage of less than £400,000, estimated to be about ten million borrowers.

About 1.7 million households will not qualify, including borrowers with a second charge against their home and those with a buy-to-let deal.

Borrowers who apply can also hold no more than £16,000 in savings and will need to already be in arrears on their monthly payments. It was also revealed that borrowers would be required to speak to a debt adviser, such as National Debtline or Citizens Advice, before approaching their lender.

Debt charities will be expected to assess whether a homeowner qualifies and to establish whether they will be able to begin repaying the debt in the near future. However, the final decision will rest with the lender.

The Chancellor announced an extra £15 million for debt charities in the Pre-Budget Report. Approximately £5 million is going to the Money Advice Trust, which runs the National Debtline. It will be recruiting another 50 debt advisers next month.

Last night it emerged that the UK’s eight biggest lenders, including HBOS — owner of Halifax — Abbey and HSBC had not offered concrete assurances that they would sign up to the scheme.

The lenders have agreed only “in principle” to the idea but are expected to come under further pressure at a meeting with ministers due today.

It is also estimated that sub-prime lenders, who are considered to be responsible for approximately half of all repossessions, will not join the scheme.

Last week Margaret Beckett, the Housing Minister, suggested that about 9,000 borrowers will take advantage of the scheme, despite estimates from the Council of Mortgage Lenders (CML), the trade body, that repossessions could top 75,000 next year.

There will be 200,000 households who are more than three months in arrears by the end of the year, according to the CML.

The Government is guaranteeing any loss experienced by lenders in the event that homeowners are not able to repay the interest that has been rolled forward.

Officials said that the Government’s liabilities if people defaulted en masse could be £1 billion. However, the Treasury estimates that the more likely cost will be about £100 million.

Currently, overstretched borrowers with mortgages below £200,000 have their interest payments covered for two years if they are on benefits under the Income Support for Mortgage Interest scheme.

Correct me if I am wrong but the housing market is the engine room of the modern British Economy. It is from here that confidence to spend ultimately stems, be it to buy new homes, sell exising ones or just release disposable income.

So assuming I am correct, the housing market needs to be nurtured, coxed and healed for this blasted recession to end….

Then what the heck are government doing by expanding the already ridiculed HIPS scheme!

Just when buying ans selling houses needs to be as easy and painless as possible they add another barrier - FARCE.

Britian desperately needs the housing market to begin to repair - this can only happen if several things change.

1) The banks must have sufficient liquidity to begin lending again. ( new large scale lenders such as insurance companies and investment funds are looking at lending money to help in this area.)
2) The general populaton needs to be reassured that prices are unlikely to fall much further. (If you think that you are going to get your home 10% cheaper in 3 months why would you not wait to buy.)
3) Additional charges and red tape must be minimised to make the purchase / sales of your home as cheap and easy as possible.

Below is the article in more detail feel free to read and question….

Now Labour makes it even HARDER to sell your home (just as buyers finally return to the market)

In a move which triggered a furious backlash, Ministers have tightened the rules on the widely-condemned Home Information Packs.

They will now have to be available on the very first day a house goes on sale, rather than 28 days later. And they have been made even more complicated with the addition of a six-page questionnaire.

Experts described the rule changes to the £300 packs as ‘absolutely farcical’ and ‘utterly bonkers’.

The shock announcement by Housing Minister Margaret Beckett was said to show ‘a complete lack of understanding’ of the paralysed property market.

Experts said homeowners already desperate to sell, such as young couples starting a family who need a bigger home, will be horrified that it could become even more difficult.

Those waiting for a better time to put property on the market could be further deterred. By a bleak coincidence, the bad news on HIPs came as the Royal Institution of Chartered Surveyors offered a glimmer of hope for the housing market. RICS said continuing price falls had finally sparked a small increase in expressions of interest from potential buyers - the first for two years.

But the decision to tighten the HIPs rules enraged the industry. Experts said it ran completely counter to other policies such as pumping billions of taxpayers’ money into the banking system, Gordon Brown’s mortgage bailout pledge and stamp duty holiday schemes. Ministers claim research on 16,000 transactions showed they were completed up to to six days earlier when a HIP was available.

But Tory spokesman Grant Shapps said: ‘The housing market is on its knees and Labour’s response is to make it more difficult and more expensive to sell your home. ‘If anything, Ministers should be using their emergency powers to suspend HIPs and provide a shot in the arm to the ailing market.’

Peter Rollings, of estate agency Marsh & Parsons, said his clients see HIPs as a complete waste of time and money. About 150 homes go on sale at his chain every month, but he has never heard of a buyer asking to see a HIP. ‘It is utterly bonkers and absolutely ridiculous,’ said Mr Rollings.

Nicholas Leeming, of the property website Propertyfinder.com, said: ‘It shows the Housing Minister is totally detached from the crisis in the property market. ‘The market is completely paralysed. It is farcical that HIPs will be allowed to make life even more difficult.’

HIPs are meant to provide all the information needed to sell a property, although they have been scaled down from the original plans.
At present, it is possible to put up a home for sale as soon as a HIP has been commissioned and paid for, with a 28-day grace period before it needs to be produced.

The concession was due to be scrapped on December 31 but, given the problems in the market, it had been widely assumed that the deadline would be extended indefinitely. Now the grace period will go in April. If a HIP is not largely completed, it will be illegal for an estate agent to market a property, with fines of £200. To make matters worse, the packs are to be made even bigger and more complicated. Sellers will also have to complete a new six-page Property Information Questionnaire. Its long list of questions includes complicated issues such as boundary changes and planning permission. If sellers fill in an answer incorrectly, they could be held liable for providing misleading information.

The Law Society warned last night that a buyer is unlikely to trust an answer provided by a desperate seller. President Paul Marsh said: ‘This is a recipe for argument. It is yet another example of the Government displaying a complete lack of understanding of the property market and no sign of sympathy with the buyer and seller.’

Mr Shapps, whose party has pledged to scrap HIPs, also expressed surprise at Mrs Beckett’s timing. She recently admitted to MPs that HIPs were ‘not perhaps the perfect vehicle we might wish for’.

Ok! After our second large drop in interest rates in a month you would be right to expect mortgage interest rates to be following suite - WRONG

It seems that Alastair Darlings showdown with the banks to force them to pass on interest rate changes to their customers has been something of a damp squib. For more background I have reproduced a article below found on The Daily Mails website. Click here to view the orginal page <><><><>

I wonder is there any benefit to dropping interest rates if the lenders do not modify their rates? As far as I can tell the answer is no Mr Darling stronger leadership please!!

HSBC pledges £15bn boost to mortgage market for 2009 as Darling backs away from showdown with the banks

HSBC has pledged to pump an extra £15billion into mortgage lending next year, bringing some much-needed cheer for struggling businesses and homeowners.

The High Street giant promised to make £1billion in extra funding available and increase its lending by a massive £15billion in 2009 - a 20 per cent rise on last year.

Its UK chief Paul Thurston said: ‘HSBC has no intention of closing its doors to customers, nor will we compromise our reputation for responsible lending. We remain open for business to the tune of £15billion.’

The boost came as Alistair Darling stepped back from another major showdown with banking chiefs over their failure to pass on interest rate cuts to borrowers.

Ok so the Bank of England reduced the UK Interest rate 1% yesterday taking it down to 2% what does this mean to the little people I hear you cry!

In theory this would reduce the cost of the average household mortgage by approximately £85 per month making life a little easier.

But hang on!

Wait a minute!

Will we actually see this saving ourselves?

Unfortunately for me and you if answer is likely to be a resounding no the reasons for this are stated below.

1) Many people are on a discounted fixed rate mortgage that will remain the same untill the end of the fixed rate period has passed.

2) Many other people are on a tracker mortgage - But surely this is good news if the interest rate falls so does the monthly payment. For the most part this is correct however many trackers include a ‘cap’ and ‘collar’. The cap is designed to limit the upper level the mortgage interest rate can reach and the collar is designed to prevent the mortgage interest rate reaching below a certain level.

Many people have a cap and collar as part of their tracker and maynot have even realised. With interest rates now down to 2% ( the lowest in 60 odd years ) most ‘collars’ will have limited around the 3% range.

3) Many banks have still ot passed on the previous 1.5% drop from 2 weeks ago. Alaistair Darling has been very vocal in the news stating a deadline for this drop to be passed on to the customers. We can expect to have the same kind of problems seing the new 1% drop being passed on to consumers.

Time will tell what kind of effect this will actually have on spending habits and the all important housing market. Remember 2009 is round the corner - lets hope its a better year.

Regards,

Simon
Editor

Below is an article posted on Thisismoney today. To summarise Gordon is putting together a scheme which will allow struggling homeowners to effectively stop paying their mortgages for a period of upto two years. There will be a ceiling of £400,000 on the defferable mortgages and so far eight of the major lenders have agreed to the scheme.

OK lets pull this apart then and ask ourselves what Gordon will achieve with this.

1) Repossesions will fall.

2) Gratitude for the Labour party will increase.

3) A greater percentage of uk mortgages will be Interest Only.

Righty ho then I’m sure there are plenty more outcomes but lets leave it there and have a look at what worries me about all this ( although the scheme recieves grudging aproval from me for the most part ).

1) How can the lenders affoard to do this when they have just borrowed billions from the government. - This is a major concern for me if the mortgage borrowers do not make payments on their mortgage for a couple of years this could put even more pressure on the embattled banks.

This is particularly worrying if the bank has severely underestimated how many people are likely to need this help.

2) Being a Tory Boy I think thats ’nuff said!

3) To be honest giving the borrower a 2 year holiday is a great idea - However by converting them to a interest only mortgage at the same time all we are doing is storing a bigger problem up for later down the line. An interest Only mortgage expects the borrow to only pay the interest on the loan not the capital borrowed. The effect of this is that at the end of the mortgage the full capital sum becomes payable this relies upon the borrower putting some form of savings vehicle in place during that period to make repayment at the end of the term. However please remember that the people entering the scheme will be those who are struggling most asking them to effectively save money up for an event many years in the future, is in my opinion, playing with fire.

Lets hope this turns out to be a possitive move - In this case i think it actually might!

Here’s that article

Struggling borrowers will get mortgage paid

Gordon Brown has thrown the housing market a lifeline by offering homeowners facing repossession a mortgage interest holiday. Families with a loan up to £400,000 can defer payments for up to two years if they suffer a sudden loss of income.

Mr Brown said his offer was aimed at 10m middle income families who live in fear of losing their jobs and their homes.
It covers more than 90% of home loans and the Treasury is praying it will put a floor under a market in freefall by restoring desperately-needed confidence.

Eight major lenders covering 70% of mortgages have signed up to the Homeowner Mortgage Support Scheme even though details are still sketchy.

And last night doubts were already growing about the practicality of the scheme. Housing Minister Margaret Beckett suggested only 9,000 families could benefit from the initiative. Those who qualify will effectively be allowed to reschedule their loan with their bank, but in exchange for a payment holiday will have to repay the money at a later date. The Government will guarantee the banks against default.

Although the potential liabilities to the taxpayer could reach £1bn, the Treasury estimates the actual cost of defaults will be £100m.

The Council of Mortgage Lenders welcomed the move and insisted it was not a charter for ‘won’t pay’ borrowers to avoid their responsibilities.

But director general Michael Coogan said: ‘The devil will be in the detail.’ The scheme was announced amid alarming predictions that repossessions could hit 75,000 next year - near the record peak of the crippling 1991 recession and far higher than the 45,000 expected this year.

However, speaking on BBC Radio Five Live last night, Mrs Beckett claimed the problem was more that people were ‘fearful’ of repossession rather than actually facing the loss of their home.

After mentioning that 9,000 families could benefit, she realised she had played down the extent of help announced by Mr Brown and added quickly: ‘I almost wish I hadn’t given you that number because no one really knows.’

The Prime Minister used his speech to surprise MPs with his mortgage rescue scheme, which had not been included in the Queen’s Speech because it does not require legislation.

Downing Street said the scheme would allow a mortgage holder to defer up to 100% of interest payments for up to two years. To qualify, applicants will have to show their income has dropped significantly and they are unable to pay their mortgage. Those with a repayment mortgage will be expected to switch to an interest-only loan.

Other useful information and links

What happens if interest rates change

What happens if i can’t keep up my repayments

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Reading the Dail Mail this morning there is an article on the second page titled ‘Mortgages are being rationed’.

It appears that the CML or Council of Mortgage Lenders Director General has stated that the UK is in a state of mortgage rationing. This means that the UK mortgage lenders are simply unable to raise sufficient funds to offer mortgages to even the qualifing borrowers.

But how can this be you may ask ( quite rightly so ) ? Good Ol’ Gordon came charging in on his white horse and created a £37 billion rescue package to restore the UK financial market to a satae of improved liquidity surely that has solved the problem!

AHAA say economists but this problem has now emerged and that problem and what about this here >!

WHEN WILL IT END I hear you scream

It seems that right now everyone has a different answer and the little people like you and me wont know the answer till we get reach the end.

Buckle your seat belts people we are in for a rocky ride!

Click here > Mortgage Quotes < to see if anyone will give you a mortgage
Click here > Mortgage Insurance < to protect you exisiting mortgage payments in the event of unemployment or sickness

As the financial markets in the UK continue to be hit by the Credit Crunch - Brokers Online has dcide to restart its finance Blog.

Here you will be able to read information on whats hapening and what is likely to happen to the UK economy in the next few months and years.

During such a difficult time I guess the best advice anyone can give you is to try not to worry unduely. Panic cause people to make silly snap decisions, try not to fall in to that trap!

Some financial products such as life insurance may feel life they are a luxury but in reality if you are finding hard to pay your bills now imagine how hard it could be without the correct forms of protection insurance.

You must also consider products such as Mortgage Payment Protection Insurance and Income Protection these products can be particularly helpful in times such as these.

Investigate your options clearly and carefully - please remember getting quotations for products is not the same as actually buying them - find out how much additional protection could cost you before you dismiss it out of hand.

Regards,

Editor Brokers Online

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Companies face severe funding woes By Chris Giles, Economics Editor Financial Times

Published: December 1 2008 20:44 | Last updated: December 1 2008 20:44

Company finances are facing the most severe squeeze in almost 30 years, Bank of England figures showed on Monday, as deposits in banks are falling fast and businesses struggle to raise new funds.

In October, deposits at banks and building societies by non-financial companies fell 5.2 per cent, the fastest rate since 1980. In the same month, the annual growth in lending to non-financial companies fell to 6.5 per cent, down from 17.9 per cent a year earlier.

Michael Saunders of Citi said: “With such a rapid deterioration in corporate liquidity, many companies cannot be patient and hope to sit out the downturn – they will have to cut back quickly on jobs and investment.”

Households are finding credit conditions almost as tough. The annual growth in the total amount of mortgage debt rose 4.5 per cent in October, the lowest growth rate since the mid 1990s.

But this figure is also deceptive because net mortgage lending since Lehman Brothers failed in September has ground almost to a halt.

Over the most recent quarter, the growth of secured lending by banks and building societies to households is lower than at any time since the Bank started collecting such data in 1963.

Household deposit growth into banks and building societies – a crucial measure of the health of the nation’s domestic finances – had been growing at a steady rate of about 8 per cent a year since 2002. Since September that rate dropped to 6 per cent, the lowest for eight years.

Such dramatic falls in the underlying strength of lending to companies and households will weigh heavily on the Bank’s monetary policy committee this week as it meets to decide interest rates. It expressed concern over the weakness in the growth of monetary aggregates last month when it cut rates 1.5 percentage points, and this concern has intensified over the past month.

Simon Ward of New Star said: “The monetary data confirm a grim near-term economic outlook and warrant a further cut in interest rates at this week’s MPC meeting.”

The weak credit figures come from the components of the Bank’s aggregate money supply, or M4, figures, which show both deposits in UK banks and building societies and lending by them. The aggregate growth of both M4 and M4 lending is rising at double digit rates, but most of this growth represents loans between subsidiaries of financial institutions or loans to the financial sector.

Original Page https://www.ft.com/cms/s/0/283b9772-bfda-11dd-9222-0000779fd18c.html?nclick_check=1