They reflect continued decisions by homeowners to pay off more of their mortgages, and lenders’ insistence that borrowers put down larger sized deposits.

The trend towards equity injections started in the second quarter of 2009. [...]]]> UK home owners increased the value of their investment in properties by £22.3bn last year according to new Bank of England research.

They reflect continued decisions by homeowners to pay off more of their mortgages, and lenders’ insistence that borrowers put down larger sized deposits.

The trend towards equity injections started in the second quarter of 2009. In the preceding 10 years, homeowners had borrowed £327bn against the inflated value of their homes.

The long house price boom, which started in the late 1990s, turned people’s homes into the equivalent of a cheap credit card.

Hundreds of thousands of home owners borrowed cash in the form of re-mortgages. They used it to pay off money they owed on credit cards, to finance big-ticket spending on items including holidays and cars, or simply to invest.

At its peak in 2003, the process was adding nearly 9% a year to the post tax income of the entire UK population.

But under the impact of the credit crunch and the property slump, home owners reversed that trend and they have now raised the equity in their properties by £36bn in 21 months.

The value of the extra equity being added each quarter slowed down during 2009, as house prices started rising again gently.

In the first quarter of 2009, home owners’ equity increased by more than £7bn, but by the fourth quarter, this had risen by only another £4bn.

HM Revenue & Customs (HMRC) is trawling Land Registry data to identify taxpayers who have bought and sold properties but failed to disclose disposals in tax returns, according to research by accountants UHY Hacker [...]]]> Home owners who have failed to declare their capital gains could soon be facing bills running into tens of thousands of Pounds.

HM Revenue & Customs (HMRC) is trawling Land Registry data to identify taxpayers who have bought and sold properties but failed to disclose disposals in tax returns, according to research by accountants UHY Hacker Young.

As a result, accountants have seen a rise in capital gains tax (CGT) inquiries focusing on residential properties, which can involve taxpayers having to pay extra tax bills running into tens of thousands of Pounds.

UHY Hacker Young, said: “CGT inquiries focused on residential properties have become much more common recently and HMRC has clearly stated in inquiry correspondence that it has obtained information on taxpayers from the Land Registry, which is something we’ve not heard before.”

Tax accountants are noticing a trend since the 2009 budget for HMRC officials to re-examine popular tax dodges to recover some of the estimated £40bn lost each year through illegal tax evasion and aggressive, but legal, tax avoidance.

The Association of Chartered Certified Accountants (ACCA), said: “HMRC is definitely becoming more aggressive to find tax evaders and has become more proactive in the past year or so. It is not leaving any stone unturned.”

In some inquiries, HMRC has argued that taxpayers have incorrectly offset some costs spent improving properties against CGT. Taxpayers are allowed to deduct the cost of work on a property from their CGT bill, but such work must be considered “enhancement expenditure” and not maintenance.

The number of second homes in England has risen by 30pc in the past decade, according to the Council of Mortgage Lenders (CML), so how can home owners avoid this timely, and often expensive, mistake?

Rules from HMRC state that if you live in more than one property you must tell your Tax Office which one you want to be treated as your main home, or your principal private residence, (PPR) for CGT purposes. You have to reside in the property to nominate it as your main home.

You have to make the nomination within two years of changing the number of properties you live in, whether the change is an increase or a decrease.

If you do not tell your Tax Office which property you want to call your main home, the question of whether a home that you sell has been your main home and eligible for private residence relief has to be decided on the facts. So it makes sense for you to decide and notify the Tax Office before the two years are up.

You do not have to keep the same house as your main home. Once you have nominated a main home you can tell the Tax Office at any time that a different property should be the one that qualifies for private residence relief but you cannot backdate the change more than two years.

This is known as “flipping”, however, care must be taken and you should consider getting professional advice- unless you are an MP when you are able to rip off taxpayers.

Also, if you buy a house for someone else to live in and own it, but don’t live in it yourself, you will not be eligible for private residence relief when you come to sell the property. You are effectively making an investment in a property, so when it is sold at a profit you will be liable to pay CGT on that gain.

This is because HMRC could claim that taxpayers who regularly carry out this type of activity are in fact engaged in a property development and therefore liable to income tax and National Insurance.

Sales had risen from September to November as first-time buyers took advantage of tax credits.

The decline in December was expected as buyers rushed to complete deals before the original 30 November deadline.

The first-time buyer tax credit has since been [...]]]> Sales of existing US homes fell 16.7% in December, according to the National Association of Realtors (NAR).

Sales had risen from September to November as first-time buyers took advantage of tax credits.

The decline in December was expected as buyers rushed to complete deals before the original 30 November deadline.

The first-time buyer tax credit has since been extended until 30 April, and the NAR said there was likely to be another surge in sales in the spring.

December sales fell to a seasonally-adjusted annual rate of 5.45 million from 6.54 million in November, but are 15% higher than the level seen in December 2008.

The average sale price of a previously-owned home was $178,300 (£110,200) in December, up 1.5% on a year ago.

Total sales in 2009 were almost 5% higher than in 2008 – the first annual gain since 2005.

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Gloomy housing sector data and continued layoffs led to a subdued Wall Street opening as investors played safe with their profits after a succession of session gains.

Investors were also reacting to a warning from [...]]]> US investors opt to take profits on release of disappointing data and as Bernanke warns that America must curb its budget deficit.

Gloomy housing sector data and continued layoffs led to a subdued Wall Street opening as investors played safe with their profits after a succession of session gains.

Investors were also reacting to a warning from Federal Reserve chairman Ben Bernanke that Congress and the Obama administration must start plotting a strategy to curb record-high US budget deficits.

Failing to do so could eventually erode investor confidence and endanger the economy’s prospects for long-term health, he said.

Testifying before the House Budget Committee, Mr Bernanle said: “Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.”

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year’s all-time high.

The Dow Jones industrial average was down 71.76points, or 0.82 per cent, lower at 8,669.11.

A survey by ADP, a payroll business, revealed that the US private sector shed 532,000 jobs in May – better than 545,000 in April but slightly higher than the 525,000 estimated.

The US Mortgage Bankers Association also said mortgage applications fell 16.1 per cent for the week ended May 29.

The CIPS/Markit purchasing managers’ monthly survey on the services sector did little to help the FTSE 100, which continued its downward spiral, slumping by 108.8 points, or 2.43 per cent, by mid-afternoon.

Heavyweight blue chips were to blame for part of the fall as they began to trade ex dividend.

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Yields on 10 year Treasury bonds have risen relentlessly since March when the Fed first announced its plan to buy $300bn (£188bn) of US [...]]]> The US Federal Reserve Board (FED may soon be forced to launch fresh blitz of quantitative, or risk seeing economic recovery snuffed out by the latest surge in long term borrowing costs.

Yields on 10 year Treasury bonds have risen relentlessly since March when the Fed first announced its plan to buy $300bn (£188bn) of US government debt directly, a move that briefly forced rates down to nearly 2.5pc, a level thought to be the Fed’s implicit target.

Yields have jumped to 3.69pc – after spiking as high as 3.74pc on Wednesday – pushing up the standard 30-year mortgage loan to 5.08pc and lifting the borrowing cost for corporations.

The US Mortgage Bankers Association yesterday highlighted the fragility of the US housing market, reporting that 12pc of homeowners are either behind on their payments or facing foreclosure, the highest level since records began.

Almost 6pc of “prime” borrowers are in arrears, showing how far the crisis has moved beyond the sub-prime. Most arrears are caused by job losses. The US unemployment rate has reached 8.1pc, and is even higher under older definitions, running at 15.8pc under Clinton-era metrics.

It is unclear why US bond yields have spiked so violently, with spill-over effects on gilts and bunds. One camp of investors is worried that inflation is rearing its ugly head again: others fear a sovereign debt crisis as over-extended states loses their AAA ratings.

What is clear is that the market choked on $100bn of US Treasury debt issued in three auctions this week, and on the knowledge that Washington must raise a further $900bn by September. Governments around the world must fund $6 trillion of deficits this year, exhausting the capital markets.

The US is at the front of the firing line. Beijing is clearly losing its patience with the Fed’s policy of printing paper, seen as a form of stealth default. There is some risk that further moves to step up quantitative easing could cause China to boycott US Treasury auctions. China and Japan together hold 23pc of all US federal debt.

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Larry Summers, chair of the National Economic Council, said there were signs that worst may be over but warned that “it is a long road and [...]]]> The US economy is still facing “substantial risks” as the property bust spreads to commercial real estate and the recession engulfs the world, a top White House adviser has said.

Larry Summers, chair of the National Economic Council, said there were signs that worst may be over but warned that “it is a long road and it is going to take time” after the damage inflicted on the financial system.

“There are downside contingencies that we’ve got to prepare for, issues in the global economy, in commercial real estate. We can’t know with certainty what’s going to happen next, and there certainly are real risks ahead,” he said at the Americas summit in Trinidad.

The University of Michigan’s index of consumer confidence rose in April to levels last seen before the collapse of Lehman Brothers in September.

US house-building appears to be stabilising near 500,000 a month, albeit a very low level. The number of new jobless claims has dropped over the last two weeks.

However, most analysts seem wary of this spring rally in equities. Duncan Niederauer, head of the New Stock Exchange, said institutional investors were holding off as short-term traders make the running.

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The funds will be used to buy government debt and to liquidate Fannie Mae and Freddie Mac.

The Fed kept interest rates on hold at 0-0.25 % as expected, however the sheer scale of the plans surprised the markets. $300 billion will [...]]]> The Federal Reserve shocked the market with a $1.15 trillion boost for the US economy.

The funds will be used to buy government debt and to liquidate Fannie Mae and Freddie Mac.

The Fed kept interest rates on hold at 0-0.25 % as expected, however the sheer scale of the plans surprised the markets. $300 billion will be made available for longer term treasury securities and $850 billion for the ailing Fannie Mae and Freddie Mac.

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The main interest was the pledge to double the amount of resources of the IMF, this essentially comforted the markets and encouraged risk appetite.

For the week ahead, the main highlight will be the US interest rate decision on Wednesday [...]]]> There was actually very little focus at the G20 on the forex markets and recent volatility.

The main interest was the pledge to double the amount of resources of the IMF, this essentially comforted the markets and encouraged risk appetite.

For the week ahead, the main highlight will be the US interest rate decision on Wednesday evening. The FOMC will not shift interest rates any further but in the light of recent initiatives from the UK and Switzerland, they could discuss other measures to help the economy.

The Rightmove Housing survey released overnight also came in slightly positive with a 0.9% month on month gain. With the Swiss and possibly other economies looking to adopt Quantitative Easing it may be perceived that the UK is ahead of the game.

Still early days and recent news that 10 jobseekers are applying for every vacancy signifies a mountain to climb before the UK economy recovers.

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He again highlighted that the US economy still faces further contraction, however he intimated that the US government would not move to nationalize US [...]]]> Following dreadful US consumer confidence data earlier in the day the Dow posted a 2% rise, this after Bernanke testified to the Senate on the health of the US economy.

He again highlighted that the US economy still faces further contraction, however he intimated that the US government would not move to nationalize US banks as this would lose value already built into banks. On the back of this there was an expected jump in bank stocks and this was the main driver for the gain in the Dow.

President Obama addressed congress for the first time yesterday and again stressed the severity of the economic crisis; he vowed to put a stop to wasteful spending and vowed that banks and bankers taking public funds would be held accountable.

He also reaffirmed his plan to cut the spiraling deficit which is becoming a huge problem for the US economy and will weigh on the dollar if not significantly reduced. Overall his address offered hope and determination for recovery as he vowed “we will build, we will recover”, lets hope so!

Yesterday in Europe we saw the German Ifo survey come more or less in line with expectations, today saw GDP come in exactly as expected at -2.1%. In the UK 4th quarter GDP was actually a touch better than expected showing a contraction of 1.5%, however taken in context this brings the year on year to -1.9% which is an 18 year low and reinforces the sharpness of the slowdown.

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Investors responded to fears that the world’s largest economy is sinking further into recession and speculation that the US Government may be forced to buy stakes in ailing banks, despite assurances from Washington that lenders would not be nationalised.

Japan’s Nikkei Index [...]]]> Asian stocks fell heavily this morning following last night’s sharp decline in American shares.

Investors responded to fears that the world’s largest economy is sinking further into recession and speculation that the US Government may be forced to buy stakes in ailing banks, despite assurances from Washington that lenders would not be nationalised.

Japan’s Nikkei Index fell by 1.5 per cent to a four-month low, narrowly avoiding a slide to below 7,000 for the first time in 26 years, closing at 7,268.56. In Hong Kong, the Hang Seng lost 461.46 points, or 3.5 per cent, to end the day at 12,713.64. Last night, the Dow Jones industrial average fell to an 11-year low, losing 250.89 points to 7,114.78.

Japanese shares remained in the red for the day despite hints from Kaoru Yosano, the newly appointed Finance Minister, that the Government may be working on more measures to support the domestic share market. “The side-effects of falling stock prices are worse than expected,” said Mr Yosano. “We are witnessing many negative wealth effects with impaired assets held by banks and insurance firms.”

Concern is growing that the Japanese banks, despite their stable capital position relative to peers in the US, will rein-in their spending even more fiercely, triggering bankruptcies throughout the small and medium-sized industrial heartlands of Japan.

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What we did see was more negativity in the equity markets as the Dow fell to the 2002 lows below 7300 amid fears that the US [...]]]> Last week although the currency markets were choppy, we did not see a significant break out of the current ranges for the main protagonists- GBP/USD, EUR/USD and GBP/EUR.

What we did see was more negativity in the equity markets as the Dow fell to the 2002 lows below 7300 amid fears that the US government will raise their stake in Citigroup and Bank of America- a step closer to nationalization which has raised concern for investors.

On the back of this the USD is showing the strain and we have seen a move higher on GBP/USD and EUR/USD reversing the dollar strength we saw last week.

Looking to the week ahead the main data to look out for will focus on releases from Europe and the US. Tomorrow we have the German IFO survey and Wednesday we see GDP data from Germany- the IFO survey will give an early indicator of current business expectations and sentiment and Wednesdays GDP will give a statistical measure of German economic activity and health. It is expected that the GDP will show a further contraction of the previous -0.5%.

It will be interesting to compare the German GDP to that of UK GDP released later in the morning on Wednesday- again we expect to see a further contraction from the previous -0.6%.

In the US GDP data released on Friday and tomorrow Ben Bernanke the fed governor will testify on the current state of the US economy and the US dollar. Also of note is Obama’s summit on the US deficit.

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Attention therefore was firmly fixed on any mention of more innovative easing initiatives and also the mood of the accompanying statement. [...]]]> With a target Fed Funds Rate ( the rate at which The US major Banks are able to borrow overnight Dollars) already at a 0 – 0.25% level, further cuts are nigh on impossible.

Attention therefore was firmly fixed on any mention of more innovative easing initiatives and also the mood of the accompanying statement. The Fed did not specifically announce a programme of longer term asset buying as part of a shift towards quantitative easing but just confirmed that the current low levels of interest rates were going to be with us for some time to come.

Their prognosis for the economy therefore remains every downbeat with little sign yet of any move towards recovery.

Market opinion therefore is that the previously discussed plan to create an entity to buy a lot of the toxic assets held by US Banks will gather momentum and as long as the Price Is Right, this should free up additional cash for those Banks to lend on to the Corporate Sector.

Still a lot of work to be done here.

One piece of good news out overnight was that the $ 800 billion stimulus package cleared the first hurdle (Congress) on its tortuous route to becoming a real injection. The dark cloud was that not one Republican member voted in favour.

It looks as though Obama is going to have a real battle if he is determined to have these measures approved across the political spectrum. The Dollar and Wall Street however both took heart with the currency making strong gains across the board.

Today sees the auction of $ 30 billion of 5-year notes – a massive amount but it will be vital for the rest of the programme that the sale goes well.

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We saw highs in cable and euro at a tad over 1.5350 and 1.3725 respectively before caution again took the upper hand. Today, consolidation at these slightly lower [...]]]> Following the marginally weaker than expected data yesterday afternoon and a growing anticipation of a greater than 50bp cut in the Fed Funds target rate this evening.

We saw highs in cable and euro at a tad over 1.5350 and 1.3725 respectively before caution again took the upper hand. Today, consolidation at these slightly lower levels, ahead of today’s FOMC meeting, looks the solid play with only US CPI and Housing Starts data this afternoon likely to cause any ripples.

We have already seen worse than expected French and German manufacturing and services PMI numbers plus the first fall on record for Qtr/Qtr Eurozone employent which really ought to quell any great desire to buy Euro from here.

The Stock and Commodity Markets, in contrast, should be reasonably lively. It is interesting to note that Goldmans have started to look more bullish on European paper and packaging companies – a sector that in normal circumstances has been a portent of future moves in the economy.

Traders are also looking to automotive stocks for movement after France becomes the first country to provide credit guarantees to the financing arms of its carmakers with a Euro 779 million payment split between Renault and Peugeot.

A sighter for the US and UK perhaps with the Germans to follow. The market remains concerned over the prospects of a failure to achieve a rapid solution to the US automakers’ bailout package however.

The Bush administration is attempting to figure out how much aid they can provide at a minimum and how to fund it while trying to balance expectations for other industry bailouts and the timing of any assistance remains up in the air.

Press reports suggest anywhere from $10bn to $40bn could be extended to the automakers and the funds could possible come from the TARP. However, since most of the first tranche has been used, Congress would have to approve the release of the second tranche for any auto bailout.

Oil has firmed ahead of an almost guaranteed production cut by OPEC at this weekend’s meeting. The call is for a 1 – 2 million barrel per day reduction with a perceived €˜acceptable price of oil at $70-75 per barrel to be targeted.

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Where to start; news from China showed that the economy there is in sharp decline removing any hope that China’s growth will cushion the impact of the global downturn and reversed optimism sparked by China’s announcement over the [...]]]> Stocks suffer as a combination of weak economic and corporate news reinforced fears of a prolonged global recession.

Where to start; news from China showed that the economy there is in sharp decline removing any hope that China’s growth will cushion the impact of the global downturn and reversed optimism sparked by China’s announcement over the weekend of a huge US$600bn stimulus package.

Earlier corporate news from the US added to the gloom with Circuit City, the second largest electrical retailer in America, filing for bankruptcy protection, DHL announcing 10,000 job cuts and shares in the troubled car maker General Motors tanking to their lowest level since 1946 on fears that a bailout by the government will wipe out any remaining shareholder value.

Also weighing on sentiment was the announcement of a further cash injection by the US government in AIG to the tune of US$150bn after the ailing insurance company recorded a third quarter loss of US$24bn.

Fannie Mae, the nationalised, US mortgage finance company also reported a massive loss in the third quarter amounting to US$29bn, with repossessions running at a total of 67,519 homes, equivalent according to the Times to a town the size of Dayton, Ohio!

More disappointing news on the UK housing market came from the Nationwide Building Society when it announced that its net mortgage lending plummeted 70% over the last six months and warned that the whole UK mortgage market would fall by 80% this year.

Home sales continue to fall according to the latest survey from the Royal Institute of Chartered Surveyors (RICS). If this was not bad enough the British Retail Consortium said that retails sales fell for a fifth straight month in October down 2.2% the biggest decline since May 2005.

It would appear that more time is needed before the effects of last week’s 1.5% cut in interest rates by the Bank of England kicks in but no doubt this data will increase the pressure on Gordon Brown and to deliver meaningful fiscal measures to reinforce the monetary stimulus provided by the central bank.

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Having waited over six months for clearance from the UK’s Office of Fair Trading (OFT) , we are pleased to announce our new loan calculator daily online service.

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Having waited over six months for clearance from the UK’s Office of Fair Trading (OFT) , we are pleased to announce our new loan calculator daily online service.

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In a report “Recession Coming” released today, the bank’s US team said the credit crunch had started to inflict serious damage on US companies.

“Slipping sales [...]]]> Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a “perfect storm” for consumers as the housing slump spreads.

In a report “Recession Coming” released today, the bank’s US team said the credit crunch had started to inflict serious damage on US companies.

“Slipping sales and tightening credit are pushing companies into liquidation mode, especially in motor vehicles,” it said.

“Three-month dollar Libor spreads have jumped by 60 to 80 basis points over the last month. High yield spreads have widened even more significantly. The absolute cost of borrowing is higher than in June.”

“As delinquencies and defaults soar, lenders are tightening credit for commercial, credit card and auto lending, as well as for all mortgage borrowers,” said the report, written by the bank’s chief US economist Dick Berner.

He said the foreclosure rate on residential mortgages had reached a 19-year high of 5.59pc in the third quarter while the glut of unsold properties would lead to a 40pc crash in housing construction.

“We think overall housing starts will run below one million units in each of the next two years — a level not seen in the history of the modern data since 1959,” he said.

Although the US job market has apparently held up well, an average monthly fall of 138,000 in the number of self-employed workers over the last quarter suggests it may now be buckling. “Consumers face what could be a perfect storm,” said Mr Berner.

The partial freeze on subprime mortgage rates announced last week by US treasury secretary Hank Paulson may help cushion the blow for some banks, but it could equally backfire by adding a “risk premium” that drives even more lenders out of the mortgage market.

Like Goldman Sachs, and Lehman Brothers, the bank no longer believes Asia and Europe will come to the rescue as America slows.

It has slashed its 2008 growth forecast for Japan from 1.9pc to 0.9pc, and warned that credit stress will weigh heavily on the eurozone.

Mr Berner said US demand is likely to contract by 1pc each quarter for the first nine months of 2008, but the picture could be far worse if the Federal Reserve fails to slash rates fast enough. It is betting on a quarter point cut this week, with three more cuts by the middle of next year. “We expect the Fed to insure against the worst outcome,” he said.

Morgan Stanley is the first major Wall Street bank to warn that it is may now be too late to stop a recession, though most have shifted to an ultra-cautious stance in recent weeks.

The bank at first treated the August crunch as a “mid-cycle correction”, much like the financial storm after Russia’s default in 1998. But the collapse of the US commercial paper market has now continued for seventeen weeks, suggesting a “fundamental deleveraging of the banking system.”

Mr Berner — known at Morgan Stanley as the “resident bull” — is one of the most closely watched analysts on Wall Street. While he began to turn bearish last April as the credit markets turned nasty, the latest report is written in tones that may is rattle the fast-diminishing band of optimists.

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Managing expectations has become a big component of the Fed’s job these [...]]]> Earlier last week, the chance of a 25 vs. 50bp rate cut was close to fifty-fifty. Now, the odds for a half point cut are less than 25 percent because the payrolls figure was not bad enough to warrant a larger rate cut.

Managing expectations has become a big component of the Fed’s job these days whether they are willing to recognise it or not. If the market is pricing in a quarter point cut and the Fed under delivers by leaving rates unchanged, they risk triggering a sharp re-pricing of the yield curve. If they over deliver by cutting interest rates 50bp, it could cause many people to wonder whether some bad news has yet to be discovered.

The Federal Reserve’s interest rate decision has the power to shift the trend in the market, but they will probably contain volatility by releasing a more cautious FOMC statement that points out the risks of both growth and inflation.

If the Fed fails to give the markets the clarity that it needs, producer prices, consumer prices and retail sales will. If inflation and spending remains strong, then the recession story gets shelved for the time being and the dollar could see a short term recovery. The other releases that we are also expecting are pending home sales, the US trade balance, import prices and industrial production.

Is the European Central Bank just talk or will they actually follow through with an interest rate cut? Unfortunately, this question will not be answered until the next ECB meeting on January 10th at the earliest. With each passing day however we have more reason to believe that the ECB could actually make good on their threats.

On Friday, German industrial production was stronger than expected while the OECD leading indicator for the Eurozone remained unchanged at 98.4. Even the Eurogroup which has previously called for the ECB to step in and stop the Euro from rising now says that the economy is proving resilient in the face of shocks.

In the week ahead, we do not have many important pieces of data other than the German ZEW survey, which has been losing its market moving potential because it has repeatedly called for a slowdown that has yet to unfold. This means that US data will probably dictate the movements in the EURUSD.

Meanwhile aside from the Federal Reserve, the Swiss National Bank also has an interest rate decision. They are widely expected to leave rates unchanged, but there is a risk for a surprise rate hike or at least hawkish commentary from the SNB.

Before Tuesday’s FOMC meeting, we are expecting producer prices and the trade balance. The UK trade deficit should improve because the export component of manufacturing PMI accelerated last month.

We already know that inflation is a problem because the latest monetary policy statement talked up the risks to short term inflation. However anything goes after the FOMC meeting because the US rate decision could shift the near term outlook for many currency pairs. On Wednesday we also have UK employment data which we expect to be pound bearish.

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