However, the Bank’s Credit Conditions Survey said that the default rate was expected to remain unchanged in the third quarter of [...]]]> The rate at which mortgage holders and businesses default on loans has fallen “unexpectedly”, according to the Bank of England.
The drop in the April-to-June period continues a trend seen with home loans since last year.

However, the Bank’s Credit Conditions Survey said that the default rate was expected to remain unchanged in the third quarter of 2010.

Lenders warned that the rate could rise if the economic outlook worsened.

The survey also found that the availability of mortgages had risen in the three months to June, compared with the previous quarter.

However, this was expected to fall back in the next three months.

Demand for new home loans fell slightly in the last three months, but the number of people wanting to remortgage had risen for the first time since the end of 2008.

Few people have been looking to remortgage in recent times, owing to the low cost of standard variable rates.

Rates charged on [...]]]> The cost of fixed rate mortgages fell to a new record low during May as competition continued to return to the market, official figures show.
The average interest rate charged on a two-year fixed-rate deal for a borrower with a 25pc deposit dropped to 3.8pc during the month, according to the Bank of England.

Rates charged on the loans have been falling steadily since last September, when they reached 4.47pc, and they are now at their lowest level since the Bank’s records began in 1995.

There was also a fall in the cost of five-year fixed-rate mortgages for people borrowing 75pc of their home’s value, with this dropping to 5.39pc from 5.5pc in April to stand at their cheapest level since May last year.

Tracker mortgages also got cheaper during May, with the rate dropping to 3.7pc from 3.79pc in April.

But despite the increase in the number of mortgages available, falling rates and a slight loosening in lending criteria, lending levels have been subdued since the beginning of the year.

“Most major UK lenders continued to expect the stock of lending to pick up [...]]]> The subdued outlook for the UK mortgage market was underlined by the Bank of England.In the latest edition of its monthly Trends In Lending publication, it said it was uncertain whether or not lending would see much of a recovery this year.

“Most major UK lenders continued to expect the stock of lending to pick up moderately in the remainder of the year, though some lenders noted the downside risks to their projections,” it said.

“Data from the major UK lenders indicate that their approvals for house purchase edged lower in April,” it added.

Despite an apparent easing of mortgage availability this year, with more deals being advertised to borrowers, the Bank said this had not, in fact, made much difference to would-be borrowers.

“Notwithstanding an increase in the number of products at loan-to-value (LTV) ratios between 75% and 89%, the proportion of loans advanced at LTV ratios above 75% has been little changed since spring 2009,” the Bank said.

“Estate agent contacts reported that the availability of mortgage finance had continued to suppress demand for houses among first-time buyers,” it added.

Mr Darling cemented his reputation as the Chancellor with the worst forecasting record in modern history after he [...]]]> Alistair Darling’s 2009 Budget has been derided as a stew of unrealistic forecasts and missed opportunities, after the labour Chancellor conceded the current slump is comparable with the Great Depression but insisted it would be over by Christmas.

Mr Darling cemented his reputation as the Chancellor with the worst forecasting record in modern history after he slashed his projection for British economic output this year to -3.5pc.

Unveiling the biggest increase in government borrowing since the Second World War, he conceded that Britain’s national debt will double to around £1.2 trillion in the coming years, and that the budget would not return to balance until 2018 or later.

In what economists described as a “fantasy Budget”, Mr Darling imposed swingeing new taxes on those who earn more than £150,000, which will raise as much as £5.5bn a year by 2012 – one of the biggest per-capita tax increases in recent history.

But while he will try to trim some departmental budgets, he will nevertheless increase the total amount the labour Government will spend this year and the next by £37.6bn. This indicates that if he does intend to balance the nation’s books, he will do so not with spending cuts but with tax rises.

However, the proposed tax and spending measures pale into insignificance against the scale and extent of the economic and fiscal crunch mapped out in the Budget small print.

The documentation reveals that this year’s economic contraction will be the worst in any year since the end of the Second World War. Indeed, according to the International Monetary Fund, this year is likely to be the worst since the 1930s, as countries around the world slump into a synchronised slowdown.

The Chancellor predicted that despite shrinking by 3.5pc this year, the UK economy would start growing again “towards the end of the year”, with 1.25pc growth next year and 3.5pc from 2011 onwards. Last night economic historians were trying in vain to find examples of developed countries that had stomached so significant a one-off drop in growth and yet managed to recover within 12 months.

As the IMF pointed out last week, recessions associated with financial crises tend to be more protracted and virulent than almost any other type, and that is precisely what the UK faces.

Indeed, alongside many City economists, the IMF expects the UK economy to shrink by a further 0.4pc next year – significantly below even the Chancellor’s revised forecasts.

Dig a little deeper into the Budget and it becomes clear that the Treasury expects nothing short of a full-scale consumer recovery – if not boom – in order to satisfy its projections. Such a prospect seems unrealistic if not outlandish, according to City experts.

Even taking at face value the Chancellor’s forecasts, the UK will have to borrow some £175bn this year and £173bn the next to make up for the shortfall in tax revenues and extra demands on the public purse from increased social welfare spending.

At over 12pc of gross domestic product, these represent the worst years for the public finances since the 1940s. However, the optimistic economic forecasts are doubly significant in this case because higher growth means a lower deficit. Should the Chancellor’s economic projections be proven wrong, the eventual outcome for the national accounts will be worse still, according to City analysts, with total borrowing likely to surpass £200bn and not to peak until next year.

The tidal wave of extra debt will push up Britain’s net national debt from below 40pc – one of the ceilings set by Gordon Brown in 1998 but since abandoned – to almost 80pc.

The Treasury said it still had no plans to reinstate any fiscal rules to bring its borrowing back under control in the future. In fact, it said it did not expect the budget to come back into balance until 2018 or beyond.

The Budget came amid continuing bad economic news, with the Office for National Statistics announcing that unemployment jumped by 177,000 to 2.1m in the three months to February, taking the jobless rate to 6.7pc.

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A continued squeeze on Credit availability (as witnessed by Friday’s BoE report) will cause the downturn to be far more severe and drawn-out than in previous recessions.

The BoE latest credit [...]]]> Judging by the press consensus leading into the start of the New Year’s trading, this will depend upon Banks’ attitude and lending practices going forward.

A continued squeeze on Credit availability (as witnessed by Friday’s BoE report) will cause the downturn to be far more severe and drawn-out than in previous recessions.

The BoE latest credit conditions survey shows that lenders tightened availability of credit to households and individuals alike over the previous quarter and expect to tighten even further in the months to come.

This further contraction of credit facilities will serve to make matters worse unless the Government/Treasury/MPC are able to come up with something more innovative than just cutting interest rates.

This is certainly the view expressed by the Times Shadow MPC at their recent meeting where the members voted 6-3 to leave rates unchanged (with the 3 looking for various degrees of rise). They painstakingly point out, however, that this should not be seen as advocating inaction – on the contrary, they look for the Bank to begin using €˜more unconventional methods for increasing money supply and stimulating the economy.

Thus, despite historical reluctance by the rate setting committee to adjusting official levels at their January meeting, we are likely to see some action at Thursday’s meeting including a further cut in the Bank’s Base Lending Rate (by 50bp in my opinion – which is the current Market thinking as well at present). We might have to wait for the minutes to be released for more flesh on the bones.

Elsewhere, Janet Yellen, the president of the San Francisco Federal Reserve Bank has advocated “pulling out all the stops” to prevent economic stagnation persisting for longer than might otherwise be necessary. She called for active, discretionary fiscal stimulus in addition to all that has gone before.

This week’s UK data looks likely to continue to be very weak with House Prices, Manufacturing Output and Producer Prices all expected to have fallen. This pattern of continued economic weakening will be mirrored in data scheduled from the Eurozone and the US during the coming week. Very little of interest out today however therefore expect a slowish start to the new trading session.

As with the start of every new year, over the coming few days we will be inundated with projections for the coming 12-months, both economic and financial inter-dispersed with calls for a full 1% cut in base rates this coming Thursday.

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Eurozone gross domestic product expanded 0.9 per cent in the fourth quarter, moving the annual rate to 3.3 per cent. In Germany [...]]]> A report showing that UK inflation slowed, will make it less likely that the Bank of England will increase interest rates. The central bank will release new forecasts for inflation and growth this morning.

Eurozone gross domestic product expanded 0.9 per cent in the fourth quarter, moving the annual rate to 3.3 per cent. In Germany the ZEW investor confidence survey pointed to a pick-up in the economy later in the year once the impact of value added tax in January starts to wear off.

U.S. retail sales are released today and they are expected to have risen for a third successive month in January as Americans redeemed holiday gift cards and took advantage of lower fuel prices. Sales are forecast to have increased by 0.3 per cent in January after a 0.9 per cent in the previous month.

The figures may show that the economy is growing at a moderate pace, a description Fed chairman Ben Bernanke is likely to share when he begins his testimony and Fed policy report later on today.

The Australian dollar jumped in early trading this morning following a rise in US trade deficit and strong European economic growth worked in the currencies favour.

Loans Calculators Blog- loans rates blog for news about interest rates- unsecured and secured loans, mortgages, remortgages and refinancing including home loans, equity release and debt consolidation.