THE latest Bank of England figures show that the number of new mortgages being given to house buyers has fallen by 20 per cent in September from a year earlier.
Last month, 102,000 new mortgages were approved for house buyers, 25,000 fewer than in September 2006, and 6,000 less than in August, the Bank said.
The property market is now cooling off rapidly and the reasons for the slow down are not a mystery.
The collapse of the US sub-prime mortgage market has just seen the boss of one of the biggest finance capitalist groups in the world, Stan O’Neal, the chief executive of Merrill Lynch, get the sack, after the bank made losses of almost $8 billion from the collapse of the US subprime mortgage market.
All over the world banks are foundering on mountains of debt. They are all forced to try and minimise the risk involved in mortgage lending by pushing their interest rates up, making mortgages even more expensive, at a time when the cost of living is soaring with petrol and diesel prices being increased on a daily basis as the price of a barrel of oil heads for $100, pushing up the price of thousands of other commodities as it does so.
At the same time as the number of new mortgages being taken up are falling rapidly, the number of repossessions of homes from mortgage holders who can no longer repay the banks is soaring.
Recent surveys have shown that the rate of inflation of house prices is also is slowing down. The Land Registry for England and Wales reported that annual property price inflation had dropped in September to 8.7 per cent from 9.4 per cent in August.
This slowdown will manifest itself most obviously in 2008, according to the Council of Mortgage Lenders (CML). It said that house price growth would slow down to just 1 per cent from an eventual 7 per cent this year. It predicted that there would be a 15 per cent decline in property sales during 2008, down to 1.01 million from an expected 1.17 million this year.
The housing market is heading towards negative equity. This is a situation where housebuyers cannot afford to continue paying their mortgages, and also cannot afford to sell their houses since the price has fallen so low it is far less than they owe the banks.
The crunch is going to come at the point where the next share collapse zeros in on debt ridden Britain, and turns into a run on the vastly overpriced pound, causing huge increases in interest rates and mortgage rates in a way that will make the 1992 Black Wednesday disaster seem like a party.
Chancellor Norman Lamont pushed interest rates and mortgage rates sky high. He could not save the pound but he managed to create the conditions where tens of thousands of mortgage holders lost their homes.
Now a deeper and more malignant crisis of the capitalist system is emerging, and is already staggering the banks.
In this critical situation the working class through its trade unions must come forward to lead the middle class in the defence of jobs, wages, homes and pensions, in a situation where the banks and the Brown government will not have the slightest hesitation, when the full brunt of the crisis breaks, in dumping the cost of all of it onto the working class and the middle class.
The trade unions must draw up their own cost of living index and insist that wage rises must be automatic and keep pace with their cost of living index, to prevent millions being driven down into extreme poverty.
The trade unions must demand the nationalisation of the banks and the abolition of the entire mortgage debt.
The working class must mobilise to resolve the capitalist crisis by organising a socialist revolution that will expropriate the bankers and the bosses to bring in a planned socialist economy.
This is the programme of the Workers Revolutionary Party. Join it today to build the revolutionary leadership of the working class.