Weak UK economy is affecting us all
Back to News & ViewsWeak UK economy is affecting us all
There is no escaping the fact that the last few weeks have been remarkably difficult for almost every aspect of the UK economy. We have seen a series of economic data that has all pointed towards a deterioration of the health of the economy and 2011 will go down as the year when the government introduced a series of austere measures that impacted on almost all sectors of the population.
The weakness of some countries in the Eurozone has not been resolved and this is having a negative effect on the worlds’ economy. The index of leading UK shares (the FTSE) has fallen nearly 14% over the last quarter, the worst quarterly decline since 2002, however, crucially the UK continues to maintain its triple A rating, whereas the USA has suffered a rating downgrade to double A.
The Monetary Policy committee (MPC) that is responsible for setting UK interest rates has an option to recommence asset purchases to loosen monetary policy (quantitative easing), to try and encourage additional growth in our economy and improve the level of the all important ‘consumer confidence’. Increasingly it looks likely as if some form of easing will be announced in the next quarter. Any possibility of a rise in interest rates is now firmly deferred until well into next year and possibly beyond.
How is this all impacting on the housing market ?
Although transaction levels are well below normal levels we have seen an uplift in some sectors of the market this year. Buy to let business volumes have increased due to a range of factors including, higher rental yields, wider availability of funding and competitive mortgage rates.
Demand for further advances has also been strong as homeowners are choosing to improve and extend their properties rather than put their property on the open market.
There are now calls for the chancellor to offer further support to first time buyers in next months autumn statement. Improving the volume of transactions for first time buyers will improve all aspects of the flow of the housing market and improve market confidence into 2012.
At the Loughborough Building Society we expect to see increased lending in this financial year, although overall volumes are still below levels seen a few years ago. Customers are rightly searching for the best deal, considering the overall cost including fees, quality of service and ensuring that the product is the right one for their needs.
Overall the housing market remains steady but while affordability levels are good, due to the on-going low levels of interest rates, I expect to see the market consolidating at current levels through the remainder of the year.
Colin Bradley
Deputy Chief Executive 3rd October 2011
Published in Loughborough Echo October 2011