Mortgage News Article

29.10.08 by Rob Gill

The R Word

UK Plc took a hammering last week in Equity and Currency markets as recession fears mount.
 
Friday’s confirmation that the economy shrank by 0.5% in Q3, far worse then the expected figure of minus 0.2%, came hot on the heels of Mervyn King and Gordon Brown both uttering the “R” word for the first time in public. The pound fell to it’s weakest level against the dollar for 6 years, hitting a low of U$ 1.52 while the FTSE dived 10% from the open on Friday.

Both the pound and the FTSE have recovered since although risks still remain on the downside. The UK is widely predicted to suffer a longer and more severe recession than other major economies as our already high level of public debt may limit scope for Keynesian-style public spending. Economist forecasts reflect this gloom with GDP to decline 1% in 2009, the FTSE to hit a low of 3,000 and the pound to sink to U$ 1.38.

This outlook is uniting economists in predicting a minimum 0.5% cut in interest rates in November, with some expecting as much as 1%. Money markets continue to reflect this outlook with 2 year Swap rates now pricing under 4.5% and 3 month Libor edging below 6% at 5.94%.

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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