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The UK economy is expected to exit the recession by the end of 2009, but thereafter growth will remain subdued.

Its economic forecast predicts that the recession will end when UK growth resumes in the fourth quarter of this year (0.5% quarter-on-quarter), helped by consumers bringing their spending forward to beat the VAT rise.

Subsequent growth in the first two quarters of 2010 will be weak at 0.3%, but this should strengthen as the global economic recovery gathers pace, businesses rebuild stocks and household spending recovers. Growth in the range of 0.5% to 0.7% is expected to be maintained through to the end of 2011, according to the CBI.

As a result, the CBI predicts annual UK GDP growth of 2.5% in 2011, following 1.2% in 2010. However, despite two years of economic expansion, UK GDP will still not have returned to its pre-recession level by the end of 2011, which illustrates the depth of the recession and the weakness of the economic recovery.

John Cridland, CBI deputy director-general, said: “The outlook is brightening as the global economy finds its feet, although we will need to keep our nerve during early 2010, and there is no sign of a clear driver of strong economic growth. In the spring many staff will face another cycle of wage freezes, and job losses will continue rising until the autumn.

“Although the first few months of 2010 will be difficult, growth will gradually pick up and increasing confidence and demand will lead the UK into a more positive 2011. Consumer spending looks to be slightly more resilient than we first thought, and a weaker pound will help to support export growth.

“However, the economy will be on a fragile path of very slow growth, as we continue to feel the lasting effects of the financial crisis. And it remains vital that government sets out clearer plans to address the fiscal deficit at its next opportunity in order to help shore up future UK economic prospects.”

The latest figures released from the Bank of England revealed that more than 25% of UK mortgage borrowers are now paying £200 less a month for their mortgage than they were this time last year. Read the rest of this entry »

An al-Qaeda terrorist who smuggled himself into the UK was given a 100% mortgage by Natwest. Albanian Krenar Lusha, 30, landed the NatWest mortgage after the bank had  failed to complete full checks on his UK status. The court heard He used his £93,000 terraced house in Derby to keep bomb-making equipment and set up an al-Qaeda base.
Lusha got the mortgage with no deposit at the height of the credit crunch last year, He had opened a NatWest account after sneaking into the UK in a lorry in 2000.
Despite failing to win asylum, he got a driving licence and an engineering job - and had declined another mortgage offer.
One mortgage adviser told Preston Crown Court: “He was just a pleasant-natured person.” But Lusha was yesterday jailed for seven years for possessing the bomb-making gear and manuals following a three-week trial. He boasted on dating websites of being a “terrorist” who “loved” to see Jews killed. Footage on his PC showed beheadings. Mr Justice Butterfield said Lusha had a side that “revelled in violence”.
Tory MP David Davies said last night: “Can we assume hundreds of illegal immigrants have been given mortgages?” NatWest said it had “robust mortgage account opening procedures”.

New mortgage lending has seen an increase of 20 % over the last 3 months.

In its quarterly report the FSA said that the UK mortgage market remained pretty flat over the last year - the total value of outstanding loans is now £1.2 trillion, an increase of 1 per cent compared to a year earlier.

But net mortgage lending increased by 20 % on Q2 2009 numbers to £40bn, but was still down on Q3 2008’s £61bn figures.

Repossessions totalled 14,000, a 2.8 per cent increase on Q2, but some 5 % below the peak at the start of the year.

The number of new arrears cases continued to fall, down by 10 per cent in the quarter to 46,000. At the end of Q3, the number of accounts in arrears had fallen to 395,000, a decrease of 2 per cent in the quarter, but 16 per cent higher than in Q3 2008.

The FSA says lending for house purchase has continued to represent an increasing share of new lending, accounting for 57 per cent of new advances and 62 per cent of new commitments in this latest quarter. Remortgages accounted for 34 per cent, the lowest proportion since the series began in 2007.

From today the  Nationwide will be lowering some of its fixed and tracker rate mortgages on offer will be  two-year fixed rates from 3.69%, up to 70% LTV and two-year trackers from 2.64%, up to 70% LTV. New customers can borrow up to 85% LTV, existing borrowers who are looking to purchase a larger house  can borrow up to 95% LTV. The products also come with a £99 booking fee payable upfront and non-refundable and a £896 reservation fee. It is also offering a two- year fixed rate at 3.99%, up to 70% LTV and a two-year tracker available from 3.24%, up to 70% LTV. New customers can borrow up to 85% LTV and existing borrowers who are moving home can borrow up to 95% LTV. It also has a £99 booking fee (payable upfront and non-refundable) and a combined no reservation fee and free legals offer available. Nationwide is also offering a three-year fixed rate available at 4.39%, up to 70% LTV and three-year tracker available from 2.99%, up to 70% LTV. New customers can borrow up to 85% LTV and existing borrowers who are moving home can borrow up to 95% LTV.It comes with a £99 booking fee (payable upfront and non-refundable) and a £896 reservation fee - reservation fee discount available to first time buyers of £500 or £250 plus free legals. Andy McQueen, mortgage director at Nationwide, says:“We are making widespread rate cuts on the majority of our house purchase products of up to 0.29%.  This, together with the special offers we have available for first time buyers and house purchasers, is good news for those trying to get on the housing ladder or secure a new home.”

The Halifax Price Index showed that House prices rose bt 1.4% in November. 

The average house price in the UK was up by 4.2% - £6,803 in the first eleven months of 2009, taking it to £167,664. Prices over the period September to November were 3.7% higher than in the last quarter.  This is the largest increase in a quarter since November 2006. Prices have increased by 8.5% since bottoming out  in April 2009. An increase in the average price of £13,174. This follows a decline of 23% between August 2007 and April 2009. But house prices in November were 1.6% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) has improved significantly from a low of -17.7% in April. �
Housing market activity continues to grow.  Completed house sales in England and Wales were 11% higher on an annual basis in August, according to the latest Land Registry figures.�
Martin Ellis, housing economist at Halifax, says: “The recovery in house prices since the spring has been driven by increased demand for property, largely due to the improvement in affordability for existing homeowners and first-time buyers who can raise the necessary deposit. �
“Somewhat higher demand has combined with a low level of properties available for sale to push up prices. Further ahead, the prospects for the market will depend on how the UK economy evolves and whether there is a significant increase in the supply of properties for sale. Overall, our view is that house prices will be flat during 2010.”

Latest information from moneysupermarket.com show the number of mortgage products available for first-time buyers is at its highest since May this year with 1,354 products now available; an increase of almost 20% since August.

moneysupermarket.com, says: “It is encouraging to see an increase in lenders providing suitable options for first time buyers, as the number of products in this arena have been low for some time. If lenders continue to give a helping hand to first time borrowers we could see a significant improvement in the housing market.
“To turn this glimmer of hope into reality for first time buyers, the Government should announce an extension on stamp duty exemption for properties under £175,000 in Wednesday’s Pre Budget Report. Even better, the Government could go one step further and raise the benchmark to £250,000 as recently suggested by the Conservatives.

“For those looking to step on the ladder Newcastle BS 2 year tracker at 2.49% is currently the best product on the market for those with a 20% deposit. First time buyers should shop around and research all products carefully as once you have considered fees, an eye catching rate may not be the cheapest option.”

Abbey has reduced rates on fixed rate and tracker mortgages on some of its high LTV deals.

The changes in the range include a 5 year fixed rate deal available only through mortgage  brokers at 6.89%, available up to 90% LTV and with a £995 booking fee, representing a cut of 0.2%.

There is also a 2 year fixed rate mortgaqe for home buyers at 5.19% up to a maximum LTV of 80% and carrying a £995 booking fee, again a reduction of 0.2%.

Abbey’s two-year tracker has been cut by 0.1% to 4.69%, available up to 85% LTV and with a £995 booking fee.

It is expected that over 90 % of the intermediary market will now be able to access the intermediary only, 90% LTV, two-year fixed rate deal with a £495 booking fee at 6.49%.

The product is available to any home buyer customers who have an existing Abbey bank account with one or more active direct debits and a regular minimum deposit of £1,000 a month.

Ricky Okey, managing director of Abbey for Intermediaries, says: “Intermediaries are keen to see more competitive rates in higher LTV products and we are finding it increasingly possible to deliver the good rates they are after.

“This product range should be a positive announcement for the intermediary market, highlighting that strong rates are on their way back in.”

For seven month in a row figures from Nationwide showed that house prices have risen – but the city  warned that the pace of growth is slowing down The average cost of a family home increased by 0.5 % in November to £162,764.

But although prices have risen nearly 3 % from the figures  a year earlier, home values remain 13% Lower than the peak of October 2007. 

Martin Gahbauer, Nationwide’s chief economist, said that despite continued economic uncertainty, better-than-expected unemployment figures had contributed to the surprise rebound in house prices this year.

He said: “Together with the fact that mortgage rates have fallen sharply as a result of base-rate cuts, this has meant that far fewer borrowers have fallen into arrears than would normally be the case in such a deep recession. As such, the downward pressure on house prices from distressed sales has so far been significantly lower than expected.”

But expected cuts in public- sector jobs during 2010, as well as the spectre of three million unemployed, may work to destabilise the housing market recovery.

The figures come after the Bank of England announced on Monday that mortgage approvals had risen for the 11th consecutive month to 57,324.

And in November, the Office for National Statistics said that unemployment in October rose at its slowest pace for 18 months, while the number of people in work increased for the first time in 14 months between July and September.

Retirement specialist LV= reveals 1.3 million over-50s still plan  to fund retirement buy cashing in properties.

The original 1960s hippies celebrated flower power, but as this generation approaches retirement, a new ‘HIPpy’ spirit has taken hold. According to a report published today by retirement specialist LV=, the ‘Home Is Pension’ mantra is still strong among Britain’s over-50s workforce. Although those surveyed believed that an average of £27,250 has been wiped off the value of their homes, an estimated 1.3 million HIPpies still plan to use their property value to help provide income in retirement.

In total, over-50s homeowners estimate they have lost £80 billion in property value due to recent housing market falls. Yet only 2% say have been turned off the idea of using their home to fund retirement, while a further 11% plan to take advice on unlocking the value of their home before they retire.

The new research also highlights the impact of the long-running house price boom on pension savings behaviour among over-50s homeowners now nearing retirement. One in eight (12%) have consciously saved less into traditional pensions because of the perceived spiralling value of their home. A further 13% say they couldn’t afford to buy their own home AND invest in traditional pensions, because property prices were so high.

Vanessa Owen, LV= Head of Equity Release, said: “In the decade leading up to the credit crunch, more and more homeowners saw their property as a potential cash cow to aid retirement. But in a matter of months millions of pre-retirees have seen both their property and pension fund values battered. Despite this, their confidence in the long-term value of bricks and mortar remains. House prices still have some way to go before full recovery but with increases for six consecutive months now, our HIPpies are feeling more confident that their home can still play a big part in helping to finance their retirement.”