It appears that this week is going to be very significant for the future of the European and world economy. The stakes could scarcely be higher, with daily developments proving to be very interesting but frankly also quite scary.
The whole free market system is creaking – the first credit crunch was averted, as readers will recall, by Central Governments underwriting the debts of banks, and now Governments are trying to borrow from bigger central banks such as the ECB, but ultimately this can only be papering over the cracks. the weak are pulling down the strong aand history seems to be repeating itself with Germany in an axiomatic position overall in terms of control of Europe as the only fundamentally strong economy in Europe.
And so it goes on – a credit crunch now seems almost like a micro problem, as the focus shifted to Governments not banks, but as the drastic intervenetion last week from the US shows, this crisis will affect all of us one way or the other.
No wonder reports last week showed that those who have any spare income are paying down their home mortgages at record levels – the times they are a changing !
More new house sales data
Just a brief entry to provide some new data re house sales. In the last month (before the momentous events now happening in macro financial and public disorder terms) the average number of properties sold per surveyor was just over 14, which is the lowest number for over 2 years.
A different survey, from the Council of Mortgage Lenders, found that over 800,000 mortgages were in negative equity during the first quarter of 2011 which is roughly half the number from the early 1990s. However, with interest rates incredibly low, this figure would be massively higher if interest rates were at historic norms, so trouble seems to be stored up for later.
Threat of repossessions – very real
According to Richard Banks, chief executive of UK Asset Resolution (Ukar), which manages many thousands of mortgages in the currently nationalized lenders Bradford & Bingley and Northern Rock, as a country, we should be concerned about what will happen if interest rates rise.
Mr Banks, who is in the know in a big way, described what could happen if interest rates rise using the word “scary”. He also advised that, even with interest rates remaining at historic lows over an extended period of time, some 23,000 out of Ukar’s 750,000 borrowers are already more than 6 months behind with their mortgage payments. Others say that repossessions are inevitable and that the policy of the Government putting pressure on lenders to put off repossessing is simply storing up trouble and putting off the inevitable.
What do you think ?
New figures from the research firm Credit Confidential show that British people, in addition to deteriorating conditions and affordability in household incomes and prices, are finding it increasingly hard to obtain credit. Credit confidential runs an index, and based on this index the level of credit obtained by UK households, reduced significantly by over 10 % to an index score of 19 for the first quarter of 2011. In turn this figure of 19 is well below the long-term average of 50.
It appears that this week is going to be very significant for the future of the European and world economy. The stakes could scarcely be higher, with daily developments proving to be very interesting but frankly also quite scary.
