Property decline – mortgage slow down

If more evidence is needed by the Bank of England and by some the bloggers to this site that things are slowing down rapidly, it has come tonight in figures showing mortgage approvals down by more than a third and house prices falling, on top of the evidence of larger falls in commercial property.

The Bank of England has let it be known it will make more money available to the money markets ahead of the year ends for the leading banks. That is welcome – better late than never. The Bank should also realise that conditions remain very tight, and interest rates remain too high for the conditions. Every bank is going to want to show a strong balance sheet with good liquidity over the year end, so there will be a scramble for cash and for smaller stronger balance sheets. That is not the background to higher inflation!

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6 Comments

  1. anoneumouse
    Posted November 29, 2007 at 11:51 pm | Permalink

    Hmmm, where is all this money that the Bank of England is making available coming from?

    Will they soon have to cash in more of the gold reserves?

    What impact will this have on the balance of payments?

    Reply: I think they are borrowing it, and creating some of it. No I don't think they are about to sell more gold – this PM only seels gold when it is cheap. The balance of payments will change little as a result of this.
    .

  2. Tony Makara
    Posted November 30, 2007 at 2:17 am | Permalink

    It is interesting to see that Mervyn King looks uncertain about which way to turn with regard to interest rates. My feeling is that the BOE will want to cut but will be under political pressure from the Labour government not to as Gordon Brown wants to keep sterling as strong as possible. Brown knows a strong pound will not only mask underlying inflation but will be an insurance against oil and commodity prices on world markets. The one thing Gordon Brown fears is inflation undermining what he portrays as his robust economy. Gordon Brown knows that once those interest rates start coming down his beloved strong pound will fall too. The question is who will make the decision, the BOE or the government?

    Reply: The MPC will make the decision, but doubtless they will take into account any strong views planted by Downing Street. I am not sure Gordon wants a strong pound – if he does, he should be worrying about the recent decline against the Euro.

  3. Steven_L
    Posted November 30, 2007 at 2:23 am | Permalink

    The used car market is very slow as well. Cars I looked at 6 or so weeks ago were still sitting there with rusted brake discs. I just got myself a very good bargain. It’s not all doom and gloom.

  4. Bradley
    Posted May 7, 2008 at 6:18 pm | Permalink

    John,

    Why is it that the Bank of England are attempting to control the deflation in the housing market when they made no attempt to control the inflation from 2003-2007?

    Their primary role was to control the government's inflation targets (even though the current index used is generally considered to be completely flawed). This seems slightly hypocritical.

    regards

    Reply: They are doing so because the government is keen for them to do so – hence the U Turn from the Governor's original position last Autumn that banks had to sort themselevs out to thre current position of substantial assitance. It all goes to show there is no such thing as a truly independent Central Bank.

  5. Lynne Philips
    Posted June 4, 2009 at 4:16 pm | Permalink

    Fascinating article, well thought of and well written with some very good advice in!

  6. Erica Rose
    Posted June 4, 2009 at 4:19 pm | Permalink

    Another good article on you blog! I always come back for me. Thanks.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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