Mortgage News Article

21.10.08 by Rob Gill

Market Calms, But Recession Looms

As markets enter a period of calm following the much vaunted “bail-out” packages from authorities around the world, the debate is shifting towards how severe the inevitable recession will become.

Action has been a little quicker on this front than to the delayed response to the credit crunch, and financial markets have reacted positively to governments making Keynesian-style public spending pledges to limit the extent of any slowdown. Yesterday Chairman of the US Federal Reserve Ben Bernanke backed fresh “fiscal stimulus” to help support the economy, which saw the Dow Jones close up 4%.

This came hot on the heels of similar pledges from the UK government, despite concerns over the state of public borrowing which reached £8.1bn in September, almost double the figure for the same month last year.

The Ernst & Young Item Club became the latest body to claim the UK is already in recession, stating the economy will decline 1% in 2009 before recovering in 2010. The Item club are also predicting a further 0.5% cut in the Bank of England base rate as soon as November, with more to follow next year to an eventual low of 3%.

This outlook has seen 2 year SWAPs drop towards 4.5% while 3 month Libor continues to ease slowly fixing at 6.12% on Monday.

News Archive

Monty's Mortgage Blog

06.01.09

A Cut, But By How Much?

The debate this week is around the next expected cut in the Bank of England Base Rate that is likely to be announced, with the main question being how much the cut is going to be, either 1% or 0.5%.

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